TROY, Mich.--(BUSINESS WIRE)--ZIVO Bioscience, Inc. (OTCQB: ZIVO), a biotech and agtech R&D company engaged in the development of therapeutic and nutritional products derived from proprietary algal cultures, today issued the following letter to shareholders from Chairman, President and Chief Executive Officer John B. Payne. Dear Fellow Shareholders, I am pleased to provide you with this important update on the significant progress by ZIVO Bioscience and a review of our exciting future direc. ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides unaudited condensed financial statements, management's discussion, market risk disclosures, and controls and procedures for the reporting period [Item 1. Condensed Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) This section presents the Company's unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with notes addressing going concern issues [Condensed Consolidated Balance Sheets](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the Company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) | | June 30, 2025 ($) | December 31, 2024 ($) | |:---|:---|:---| | **ASSETS** | | | | Cash | $9,823 | $1,542,442 | | Accounts receivable | $34,364 | $2,211 | | Prepaid expenses | $365,707 | $90,789 | | Total current assets | $409,894 | $1,635,442 | | Operating lease - right of use asset | $285,753 | $- | | Security deposit | $7,680 | $7,680 | | **TOTAL ASSETS** | **$703,327** | **$1,643,122** | | **LIABILITIES** | | | | Accounts payable | $860,939 | $547,090 | | Accounts payable – related party | $70,056 | $194,762 | | Customer deposits | $34,364 | $- | | Current portion of long-term operating lease | $63,219 | $- | | Convertible debentures payable | $138,510 | $138,164 | | Loan payable – current portion | $292,919 | $- | | Accrued interest | $65,628 | $65,628 | | Accrued liabilities – employee bonus | $1,433,953 | $1,096,179 | | Total current liabilities | $2,959,588 | $2,041,823 | | Lease liabilities | $237,523 | $- | | Long-term note payable, net of current portion | $46,962 | $116,197 | | Total long-term liabilities | $284,485 | $116,197 | | **TOTAL LIABILITIES** | **$3,244,073** | **$2,158,020** | | **STOCKHOLDERS' EQUITY (DEFICIT)** | | | | Common stock | $3,817 | $3,621 | | Additional paid-in capital | $140,273,406 | $136,448,032 | | Accumulated deficit | $(142,817,969) | $(136,966,551) | | **Total stockholders' equity (deficit)** | **$(2,540,746)** | **$(514,898)** | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)** | **$703,327** | **$1,643,122** | - Cash decreased significantly from **$1,542,442** at December 31, 2024, to **$9,823** at June 30, 2025[9](index=9&type=chunk) - Total assets decreased from **$1,643,122** to **$703,327**, while total liabilities increased from **$2,158,020** to **$3,244,073**[10](index=10&type=chunk) - Total stockholders' equity (deficit) worsened from **$(514,898)** to **$(2,540,746)**[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section details the Company's revenues, costs, and expenses, culminating in net loss for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | |:---|:---|:---|:---|:---| | **REVENUES** | | | | | | Product revenue | $53,400 | $- | $53,400 | $35,720 | | Total revenues | $53,400 | $- | $53,400 | $35,720 | | **COSTS OF GOODS SOLD** | | | | | | Product costs | $35,478 | $- | $35,478 | $23,218 | | Total cost of goods sold | $35,478 | $- | $35,478 | $23,218 | | **GROSS MARGIN** | **$17,922** | **$-** | **$17,922** | **$12,502** | | **COSTS AND EXPENSES** | | | | | | General and administrative | $1,171,137 | $5,977,277 | $2,610,689 | $6,952,851 | | Research and development | $479,657 | $2,252,325 | $3,248,892 | $2,565,092 | | Total costs and expenses | $1,650,794 | $8,229,602 | $5,859,581 | $9,517,943 | | **LOSS FROM OPERATIONS** | **$(1,632,872)** | **$(8,229,602)** | **$(5,841,659)** | **$(9,505,441)** | | **OTHER (EXPENSE)** | | | | | | Interest expense | $(7,360) | $(6,766) | $(9,759) | $(9,413) | | Total other expense | $(7,360) | $(6,766) | $(9,759) | $(9,413) | | **NET LOSS** | **$(1,640,232)** | **$(8,236,368)** | **$(5,851,418)** | **$(9,514,854)** | | BASIC AND DILUTED LOSS PER SHARE ($) | $(0.43) | $(2.78) | $(1.55) | $(3.31) | | WEIGHTED AVERAGE BASIC AND DILUTED SHARES OUTSTANDING (Shares) | 3,810,065 | 2,961,606 | 3,780,238 | 2,875,631 | - Product revenue for the three months ended June 30, 2025, was **$53,400**, a significant increase from **$0** in the comparable prior year period[12](index=12&type=chunk) - Net loss for the three months ended June 30, 2025, decreased to **$(1,640,232)** from **$(8,236,368)** in the prior year, and for the six months, it decreased to **$(5,851,418)** from **$(9,514,854)**[13](index=13&type=chunk) - Basic and diluted loss per share improved to **$(0.43)** for the three months ended June 30, 2025, from **$(2.78)** in the prior year[13](index=13&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This section outlines changes in the Company's equity, including common stock, additional paid-in capital, and accumulated deficit over the reporting period - The accumulated deficit increased from **$(136,966,551)** at December 31, 2024, to **$(142,817,969)** at June 30, 2025[16](index=16&type=chunk) - Total stockholders' equity (deficit) worsened from **$(514,898)** at December 31, 2024, to **$(2,540,746)** at June 30, 2025[16](index=16&type=chunk) - Issuances of common stock for employee and director equity-based compensation, exchange agreements, and private sales contributed to additional paid-in capital[14](index=14&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) This section presents the Company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statement of Cash Flows (Unaudited) | | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | |:---|:---|:---| | **Cash Flows for Operating Activities:** | | | | Net loss | $(5,851,418) | $(9,514,854) | | Adjustments to reconcile net loss to net cash used by operating activities: | | | | Non-cash lease expense | $(14,828) | $49,877 | | Employee and director equity-based compensation | $937,288 | $7,661,759 | | Other expenses related to extinguishment of colicense agreements | $2,738,282 | $- | | Prepaid expenses | $(274,918) | $(345,399) | | Customer deposits | $34,364 | $15,000 | | Accounts receivable | $(32,153) | $3,735 | | Accounts payable | $313,849 | $100,379 | | Accounts payable – related party | $(124,706) | $(93,265) | | Lease liabilities | $29,818 | $(55,422) | | Accrued liabilities | $337,774 | $(144,582) | | **Net cash (used in) operating activities** | **$(1,906,648)** | **$(2,322,772)** | | **Cash Flows from Investing Activities:** | | | | Net cash from by investing activities | $- | $- | | **Cash Flow from Financing Activities:** | | | | Proceeds of loans payable, other | $488,198 | $517,560 | | Payments of loans payable, other | $(195,279) | $(230,027) | | Payment of term debt | $(68,890) | $- | | Proceeds from private sales of common stock - other | $100,000 | $972,544 | | Proceeds from private sales of common stock – related party | $50,000 | $790,781 | | **Net cash provided by financing activities** | **$374,029** | **$2,050,858** | | **Increase (decrease) in cash** | **$(1,532,619)** | **$(271,914)** | | Cash at beginning of period | $1,542,442 | $274,380 | | **Cash at end of period** | **$9,823** | **$2,466** | - Net cash used in operating activities decreased by approximately **$400,000**, from **$(2,322,772)** in H1 2024 to **$(1,906,648)** in H1 2025[18](index=18&type=chunk) - Net cash provided by financing activities significantly decreased from **$2,050,858** in H1 2024 to **$374,029** in H1 2025[18](index=18&type=chunk) - Cash at the end of the period decreased substantially from **$1,542,442** at the beginning of the period to **$9,823** at June 30, 2025[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1 - Basis of Presentation and Going Concern](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles used and addresses the Company's ability to continue as a going concern - The Company has incurred net losses and negative cash flows since inception, resulting in an accumulated deficit of **$142,817,969**, raising substantial doubt about its ability to continue as a going concern[25](index=25&type=chunk)[27](index=27&type=chunk) - Operations are historically financed through common stock, warrants, and debt, with future funding dependent on raising additional capital without assurance of success[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 2 - Leases](index=7&type=section&id=NOTE%202%20-%20LEASES) This note details the Company's lease agreements, including new operating leases and associated assets and liabilities - The Company entered new operating lease agreements in January 2025 for facilities in Fort Myers, Florida (36 months) and Troy, Michigan (63 months)[21](index=21&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - Total operating lease assets and liabilities of **$315,571** were recorded at lease commencement[21](index=21&type=chunk) Operating Lease Expense | Period | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 6 Months Ended June 30, 2025 ($) | 6 Months Ended June 30, 2024 ($) | |:---|:---|:---|:---|:---| | Operating lease expense | $23,515 | $27,235 | $47,030 | $54,471 | [Note 3 - Debt](index=8&type=section&id=NOTE%203%20-%20DEBT) This note provides information on the Company's debt obligations, including short-term unsecured loans - On March 5, 2025, the Company entered a short-term unsecured loan for **$488,198** at **7.85% APR**, with a principal balance of **$292,919** outstanding as of June 30, 2025[33](index=33&type=chunk) - A similar loan from March 2024 for **$517,560** at **8.5% APR** was fully paid by November 9, 2024[34](index=34&type=chunk) [Note 4 - Deferred R&D Obligations - Participation Agreements](index=8&type=section&id=NOTE%204%20-%20DEFERRED%20R%26D%20OBLIGATIONS%20-%20PARTICIPATION%20AGREEMENTS) This note details the Company's deferred R&D obligations from participation agreements and subsequent exchange agreements - The Company entered into 21 Participation Agreements (2020-2021) for **$2,985,000**, granting participants a **44.78%** 'Revenue Share' from licensing ZIVO's algae cultures, with the R&D obligation fully amortized by December 31, 2023[35](index=35&type=chunk)[36](index=36&type=chunk) - From January to April 2025, the Company executed 17 Exchange Agreements, issuing **146,660** common shares (including **47,320** to related parties) to cancel future revenue share rights, valued at **$2,738,282** and expensed as R&D[19](index=19&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) [Note 5 - Stockholders' Equity (Deficit)](index=9&type=section&id=NOTE%205%20-%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note provides details on changes in stockholders' equity, including common stock issuances and equity compensation expenses Equity Sales (Proceeds and Shares Issued) | Period | Total Proceeds ($) | Total Shares Issued (Shares) | Related Party Proceeds ($) | Related Party Shares Issued (Shares) | |:---|:---|:---|:---|:---| | 3 Months Ended June 30, 2025 | $150,000 | 10,632 | $50,000 | 3,488 | | 3 Months Ended June 30, 2024 | $659,999 | 83,887 | $659,999 | 83,887 | | 6 Months Ended June 30, 2025 | $150,000 | 10,632 | $50,000 | 3,488 | | 6 Months Ended June 30, 2024 | $1,763,325 | 491,186 | $790,781 | 140,553 | Equity Compensation Expense | Period | Total Expense ($) | R&D Expense ($) | G&A Expense ($) | |:---|:---|:---|:---| | 3 Months Ended June 30, 2025 | $336,743 | $19,424 | $317,319 | | 3 Months Ended June 30, 2024 | $7,549,655 | $2,025,580 | $5,524,075 | | 6 Months Ended June 30, 2025 | $937,288 | $59,992 | $877,296 | | 6 Months Ended June 30, 2024 | $7,661,759 | $2,060,228 | $5,601,531 | - As of June 30, 2025, there was no remaining unrecognized compensation expense related to Restricted Stock Awards (RSAs), compared to **$1,055,454** at June 30, 2024[55](index=55&type=chunk) [Note 6 - Commitments and Contingencies](index=12&type=section&id=NOTE%206%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's contractual commitments and potential liabilities, including compensation agreements and legal matters - The Company has compensation agreements with its President/CEO and CFO[61](index=61&type=chunk) - Management believes there are no pending legal matters that would have a material adverse effect on the Company's financial condition, results of operation or cash flows[62](index=62&type=chunk) [Note 7 - Segment Reporting](index=12&type=section&id=NOTE%207%20-%20SEGMENT%20REPORTING) This note describes the Company's operating segments and how financial results are managed and evaluated - The Company operates in one reportable segment: microalgae technology, focusing on research and development in both therapeutic and nutritional sectors[63](index=63&type=chunk) - Financial results are managed and evaluated on a consolidated basis by the Chief Executive Officer, who serves as the Chief Operating Decision Maker (CODM)[64](index=64&type=chunk) [Note 8 - Income Tax](index=13&type=section&id=NOTE%208%20-%20INCOME%20TAX) This note explains the Company's income tax position, including deferred tax assets and valuation allowances - The Company has recorded a full valuation allowance against its net deferred tax asset, as realization is not more likely than not[66](index=66&type=chunk) - Income tax expense is expected to be **$0** for 2025 based on the Company's effective tax rate and full valuation allocation[67](index=67&type=chunk) [Note 9 - Subsequent Events](index=13&type=section&id=NOTE%209%20-%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 4, 2025, the Board approved an unsecured convertible loan program for up to **$2 million**[68](index=68&type=chunk) - On July 8, 2025, the Company entered a Convertible Loan Agreement for **$250,000** at **10%** interest over 24 months, issuing a warrant to purchase **1,793** shares at **$13.94** per share[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition and operational results, covering revenue, expenses, liquidity, and capital resources, emphasizing R&D focus and ongoing funding needs [Special Note Regarding Forward-Looking Statements](index=13&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This note cautions readers about forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements subject to known and unknown risks and uncertainties that may cause actual results to differ materially[69](index=69&type=chunk)[70](index=70&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which represent estimates and assumptions only as of the report date[70](index=70&type=chunk) - Important factors that may cause actual results to differ are discussed in the 'Risk Factors' section of the Company's Annual Report on Form 10-K[71](index=71&type=chunk) [Overview](index=14&type=section&id=Overview) This section provides a general description of ZIVO's business, focusing on its research and development activities in biotech and agtech sectors - ZIVO is a research and development company operating in biotech and agtech sectors, with an intellectual property portfolio of proprietary algal and bacterial strains, bioactive molecules, and production techniques[72](index=72&type=chunk) - In biotech, ZIVO develops bioactive compounds from its algal culture for human and animal diseases, seeking strategic partners for development and commercialization[73](index=73&type=chunk)[74](index=74&type=chunk) - In agtech, ZIVO's algal biomass, produced in Peru, is positioned as a functional food ingredient and nutritional enhancement (branded Zivolife®) for human and animal use, and for skin care products[75](index=75&type=chunk)[78](index=78&type=chunk) [Results of Operations (Three Months Ended June 30, 2025 vs 2024)](index=15&type=section&id=Results%20of%20Operations%20for%20the%20three%20months%20ended%20June%2030,%202025%20and%202024) This section analyzes the Company's financial performance for the three months ended June 30, 2025, compared to the same period in 2024 Operating Results (Three Months Ended June 30) | | 2025 ($) | 2024 ($) | |:---|:---|:---| | Total revenue | $53,400 | $- | | Total cost of goods sold | $35,478 | $- | | Gross margin | $17,922 | $- | | Research and development | $479,657 | $2,252,325 | | General and administrative | $1,171,137 | $5,977,277 | | Loss from operations | $(1,632,872) | $(8,229,602) | | Total other expense | $(7,360) | $(6,766) | - Revenue increased to **$53,400** in Q2 2025 from **$0** in Q2 2024, driven by sales of dried algal biomass[83](index=83&type=chunk) - General and administrative expenses decreased by approximately **$4.8 million**, primarily due to a **$3.4 million** decrease in non-cash equity compensation and **$1.8 million** lower professional services[85](index=85&type=chunk) - Research and development expenses decreased to **$480,000**, with a **$2.0 million** decrease in gross R&D spending (excluding amortization of exchange agreements) due to lower non-cash equity compensation and headcount[86](index=86&type=chunk)[87](index=87&type=chunk) [Results of Operations (Six Months Ended June 30, 2025 vs 2024)](index=16&type=section&id=Results%20of%20Operations%20for%20the%20six%20months%20ended%20June%2030,%202025%20and%202024) This section analyzes the Company's financial performance for the six months ended June 30, 2025, compared to the same period in 2024 Operating Results (Six Months Ended June 30) | | 2025 ($) | 2024 ($) | |:---|:---|:---| | Total revenue | $53,400 | $35,720 | | Total costs of goods sold | $35,478 | $23,218 | | Gross margin | $17,922 | $12,502 | | Research and development | $3,248,892 | $2,565,092 | | General and administrative | $2,610,689 | $6,952,851 | | Loss from operations | $(5,841,659) | $(9,505,441) | | Total other expense | $(9,759) | $(9,413) | | Net loss | $(5,851,418) | $(9,514,854) | - Revenue increased by approximately **$20,000** to **$53,400** in H1 2025 from **$35,720** in H1 2024, due to higher sales volumes[91](index=91&type=chunk) - General and administrative expenses decreased by approximately **$4.4 million**, primarily due to **$3.0 million** lower labor-related costs (non-cash equity compensation) and **$1.3 million** lower professional services[93](index=93&type=chunk) - Research and development expenses increased to **$3.2 million** in H1 2025, primarily due to **$2.7 million** amortization of exchange agreements; excluding this, gross R&D spending decreased by **$2.1 million**[94](index=94&type=chunk)[95](index=95&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet its short-term and long-term financial obligations and its sources of funding - As of June 30, 2025, the Company's cash balance was **$9,823**, and management noted substantial doubt about its ability to continue as a going concern[97](index=97&type=chunk)[102](index=102&type=chunk) - The Company estimates a need for approximately **$6.0 million** in cash over the next 12 months for basic operations, excluding R&D initiatives, and historically has had difficulty raising external funds[102](index=102&type=chunk)[108](index=108&type=chunk) Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | |:---|:---|:---| | Operating activities | $(1,906,648) | $(2,322,772) | | Investing activities | $- | $- | | Financing activities | $374,029 | $2,050,858 | | Net increase (decrease) in Cash | $(1,532,619) | $(271,914) | [Critical Accounting Policies and Significant Judgments and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section outlines the key accounting policies and the significant judgments and estimates made by management in preparing the financial statements - The financial statements are prepared in accordance with US GAAP, requiring management to make estimates, judgments, and assumptions that affect reported amounts[109](index=109&type=chunk) - There have been no material changes to the critical accounting estimates previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[110](index=110&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Zivo Bioscience, Inc. is not required to provide quantitative and qualitative disclosures about market risk - This item is not applicable for smaller reporting companies[112](index=112&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding they were ineffective due to material weaknesses, and outlines remediation plans [Evaluation of Disclosure Controls and Procedures](index=19&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section presents the CEO and CFO's conclusion on the effectiveness of the Company's disclosure controls and procedures - The CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025[113](index=113&type=chunk)[114](index=114&type=chunk) - Material weaknesses identified as of December 31, 2024, in the Annual Report on Form 10-K continue to exist[114](index=114&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=20&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section identifies specific material weaknesses in the Company's internal control over financial reporting, affecting its control environment, risk assessment, and control activities - Material weaknesses include a lack of structure, insufficient qualified resources, and inadequate oversight in the control environment, as well as ineffective risk assessment and evaluation of internal control components[115](index=115&type=chunk) - Additional material weaknesses exist in control activities and information/communication, including inappropriate IT general controls and lack of formal accounting policies and procedures across business processes[116](index=116&type=chunk)[120](index=120&type=chunk) - Despite these material weaknesses, management concluded that the consolidated financial statements fairly present the Company's financial position, results of operations, and cash flows in conformity with U.S. GAAP[117](index=117&type=chunk) [Remediation Plans](index=20&type=section&id=Remediation%20Plans) This section outlines the Company's planned actions to address and remediate the identified material weaknesses in internal control over financial reporting - Remediation actions include developing training programs on the COSO Internal Control Framework, implementing a risk assessment process, and developing comprehensive accounting policies and procedures[119](index=119&type=chunk)[128](index=128&type=chunk) - The Company plans to enhance policies for documentary evidence of management review controls, engage outside resources for complex accounting matters, and develop monitoring activities for control effectiveness[128](index=128&type=chunk) - Further actions involve segregating key functions in financial and IT processes, reassessing IT policies, and continuing to formalize accounting, business operations, and IT policies for accurate financial reporting[128](index=128&type=chunk) [Changes in Internal Control Over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in the Company's internal control over financial reporting during the quarter - No other material changes in internal control over financial reporting occurred during the quarter ending June 30, 2025, except for the ongoing remediation actions[121](index=121&type=chunk) [PART II - OTHER INFORMATION](index=21&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional disclosures not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not a party to any material legal proceedings and is unaware of any pending or threatened actions that would materially impact its financial condition or operations - Management believes there are no pending legal matters involving the Company that would have a material adverse effect upon its financial condition, results of operation or cash flows[62](index=62&type=chunk)[124](index=124&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024[125](index=125&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, the Company issued **10,632** common shares in unregistered private sales, generating **$150,000** in proceeds, exempt from registration under Section 4(a)(2) or Rule 701 Unregistered Sales of Common Stock (April 1 - June 30, 2025) | Name | Form | Date | Amount Received ($) | Common Stock Shares (Shares) | |:---|:---|:---|:---|:---| | David Mendelson | Purchase of Common Stock | 24-Apr-25 | $100,000.00 | 7,144 | | HEP Investments, LLC | Purchase of Common Stock | 13-Jun-25 | $50,000.00 | 3,488 | - The sales were exempt from registration under Section 4(a)(2) or Rule 701 of the Securities Act, with recipients representing intentions to acquire for investment only[129](index=129&type=chunk) [Item 3. Defaults upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable to the Company - Not applicable[130](index=130&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[131](index=131&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - None[132](index=132&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant forms, certifications, and XBRL interactive data files - Exhibits include Articles of Incorporation, By-laws, Description of Securities, various Forms of Warrants, Certifications (Principal Executive Officer, Principal Financial Officer), and Inline XBRL documents[134](index=134&type=chunk)[135](index=135&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents Zivo Bioscience's unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) - The company's cash significantly decreased from **$1,542,442** at December 31, 2024, to **$517,189** at March 31, 2025[9](index=9&type=chunk)[10](index=10&type=chunk) - Total current assets also declined from **$1,635,442** to **$1,022,923**[9](index=9&type=chunk)[10](index=10&type=chunk) - Total liabilities increased from **$2,158,019** to **$2,948,613**, primarily driven by an increase in current liabilities[9](index=9&type=chunk)[10](index=10&type=chunk) - Stockholders' deficit worsened from **$(514,897)** to **$(1,617,279)**[9](index=9&type=chunk)[10](index=10&type=chunk) | ASSETS (March 31, 2025) | Amount ($) | ASSETS (December 31, 2024) | Amount ($) | | :---------------------- | :--------- | :------------------------- | :--------- | | Cash | 517,189 | Cash | 1,542,442 | | Prepaid expenses | 505,734 | Prepaid expenses | 90,789 | | Total current assets | 1,022,923 | Total current assets | 1,635,442 | | Total assets | 1,331,334 | Total assets | 1,643,122 | | LIABILITIES & EQUITY (March 31, 2025) | Amount ($) | LIABILITIES & EQUITY (December 31, 2024) | Amount ($) | | :------------------------------------ | :--------- | :--------------------------------------- | :--------- | | Total current liabilities | 2,612,701 | Total current liabilities | 2,041,822 | | Total long-term liabilities | 335,912 | Total long-term liabilities | 116,197 | | Total liabilities | 2,948,613 | Total liabilities | 2,158,019 | | Total stockholders' equity (deficit) | (1,617,279) | Total stockholders' equity (deficit) | (514,897) | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) - The company reported no revenue for the three months ended March 31, 2025, a **100% decrease** from **$35,720** in the prior year[12](index=12&type=chunk)[13](index=13&type=chunk) - Research and development expenses surged by **785.4%** to **$2,769,236**, primarily due to costs associated with extinguishing Participation Agreements[12](index=12&type=chunk)[13](index=13&type=chunk)[82](index=82&type=chunk) - General and administrative expenses also increased by **47.6%** to **$1,439,552**[12](index=12&type=chunk)[13](index=13&type=chunk) - Consequently, the net loss widened significantly to **$(4,211,188)** from **$(1,278,486)** year-over-year, and loss per share increased to **$(1.12)** from **$(0.47)**[12](index=12&type=chunk)[13](index=13&type=chunk) | Metric (Three Months Ended March 31) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total revenues | - | 35,720 | (35,720) | -100.0% | | Total costs of goods sold | - | 23,218 | (23,218) | -100.0% | | Gross margin | - | 12,502 | (12,502) | -100.0% | | General and administrative | 1,439,552 | 975,574 | 463,978 | 47.6% | | Research and development | 2,769,236 | 312,767 | 2,456,469 | 785.4% | | Total costs and expenses | 4,208,788 | 1,288,341 | 2,920,447 | 226.7% | | Loss from operations | (4,208,788) | (1,275,839) | (2,932,949) | 229.9% | | Net loss | (4,211,188) | (1,278,486) | (2,932,702) | 229.4% | | Basic and diluted loss per share | (1.12) | (0.47) | (0.65) | 138.3% | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) - The accumulated deficit increased significantly from **$(136,966,550)** at December 31, 2024, to **$(141,177,738)** at March 31, 2025, primarily due to the net loss incurred[14](index=14&type=chunk) - Additional paid-in capital increased by over **$3 million**, driven by equity-based compensation and shares issued through exchange agreements for Participation Agreements[14](index=14&type=chunk) | Metric (Three Months Ended March 31, 2025) | Shares | Amount ($) | Additional Paid in Capital ($) | Accumulated Deficit ($) | Total ($) | | :----------------------------------------- | :---------- | :--------- | :----------------------------- | :---------------------- | :----------- | | Balance, December 31, 2024 | 3,621,335 | 3,621 | 136,448,032 | (136,966,550) | (514,897) | | Employee and director equity-based comp. | 38,378 | 38 | 600,507 | - | 600,545 | | Exchange agreements – other | 84,060 | 84 | 1,645,704 | - | 1,645,788 | | Exchange agreements – related party | 47,320 | 48 | 862,425 | - | 862,473 | | Net loss for the period | - | - | - | (4,211,188) | (4,211,188) | | Balance, March 31, 2025 | 3,791,093 | 3,791 | 139,556,668 | (141,177,738) | (1,617,279) | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) - Cash used in operating activities decreased from **$(1,699,118)** in Q1 2024 to **$(1,430,238)** in Q1 2025, primarily due to more favorable changes in working capital[16](index=16&type=chunk)[18](index=18&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - Cash provided by financing activities significantly decreased from **$1,563,379** in Q1 2024 to **$404,985** in Q1 2025, mainly because there were no proceeds from private sales of common stock in Q1 2025, unlike the prior year[16](index=16&type=chunk)[18](index=18&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - Overall, cash decreased by **$(1,025,253)** in Q1 2025, resulting in an ending cash balance of **$517,189**[16](index=16&type=chunk)[18](index=18&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - Non-cash investing and financing activities for Q1 2025 included the issuance of **131,380 shares** of common stock (including **47,320** to related parties) through fifteen Exchange Agreements, and the exchange of **$194,762** of accounts payable to related parties into **32,996 shares** of common stock[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - The Company also entered into new operating leases for a laboratory/office facility in Fort Myers, Florida, and office space in Troy, Michigan, recording **$315,571** in operating lease assets and liabilities[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 000-30415 ZIVO BIOSCIENCE, INC. (Exact name of Registrant as specified in its charter) Nevada 87-0699977 (State or other jurisdic ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's analysis of Zivo Bioscience, Inc [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides Zivo Bioscience, Inc.'s unaudited condensed consolidated financial statements and related notes for the reporting period [Condensed Consolidated Balance Sheet](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) This table presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | ASSETS/LIABILITIES | September 30, 2024 | December 31, 2023 | | :----------------- | :----------------- | :----------------- | | **Current Assets:** | | | | Cash | $159,403 | $274,380 | | Accounts receivable | $27,794 | $3,735 | | Prepaid expenses | $249,348 | $147,262 | | **Total current assets** | **$436,545** | **$425,377** | | **Total Assets** | **$495,587** | **$555,715** | | **Current Liabilities:** | | | | Accounts payable | $787,599 | $993,090 | | Accounts payable – related party | $136,261 | $172,670 | | Customer deposits | $45,000 | $- | | Current portion of long-term operating lease | $22,027 | $106,342 | | Convertible debentures payable | $240,000 | $240,000 | | Loan Payable | $115,014 | $- | | Accrued interest | $102,481 | $100,686 | | Accrued liabilities – employee bonus | $1,130,274 | $1,148,770 | | **Total current liabilities** | **$2,578,656** | **$2,761,558** | | **Total Liabilities** | **$2,578,656** | **$2,761,558** | | **Stockholders' Equity (Deficit):** | | | | Common stock | $3,490 | $2,382 | | Additional paid-in capital | $133,278,605 | $121,373,488 | | Accumulated deficit | $(135,365,164) | $(123,581,713) | | **Total stockholders' equity (deficit)** | **$(2,083,069)** | **$(2,205,843)** | - Total assets **decreased from $555,715 to $495,587** between December 31, 2023, and September 30, 2024[10](index=10&type=chunk) - Total current liabilities **decreased from $2,761,558 to $2,578,656** between December 31, 2023, and September 30, 2024[10](index=10&type=chunk) - Stockholders' deficit **improved from $(2,205,843) to $(2,083,069)** between December 31, 2023, and September 30, 2024[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table outlines the company's revenues, expenses, and net loss for the three and nine months ended September 30, 2024 and 2023 | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product revenue | $31,500 | $11,800 | $67,220 | $15,850 | | Total revenues | $31,500 | $11,800 | $67,220 | $15,850 | | Total cost of goods sold | $22,050 | $7,670 | $45,268 | $8,371 | | Gross margin | $9,450 | $4,130 | $21,952 | $7,479 | | General and Administrative | $1,943,127 | $1,355,865 | $8,895,978 | $4,309,343 | | Research and Development | $326,361 | $220,653 | $2,891,452 | $1,064,563 | | Total costs and expenses | $2,269,487 | $1,576,518 | $11,787,430 | $5,373,906 | | Loss from operations | $(2,260,037) | $(1,572,388) | $(11,765,478) | $(5,366,427) | | Total other expense | $(8,560) | $(252,534) | $(17,973) | $(502,210) | | Net loss | $(2,268,597) | $(1,824,922) | $(11,783,451) | $(5,868,637) | | Basic and Diluted Loss Per Share | $(0.67) | $(1.05) | $(3.87) | $(3.64) | | Weighted Average Basic and Diluted Shares Outstanding | 3,410,444 | 1,735,887 | 3,041,466 | 1,610,861 | - Product revenue for the three months ended September 30, 2024, **increased by 166.9% to $31,500** from $11,800 in the prior year period[12](index=12&type=chunk) - Net loss for the nine months ended September 30, 2024, significantly **widened to $(11,783,451)** from $(5,868,637) in the prior year period[13](index=13&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit) (For the Three Months Ended September 30, 2024 and 2023)](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)%20-%20Three%20Months) This statement details changes in stockholders' equity, including stock issuances and net loss, for the three months ended September 30 | Metric | Balance, June 30, 2024 | Private offering issuance of stock and warrants | Private offering issuance of stock and warrants – related parties | Employee and director equity-based compensation | Net loss for the three months ended September 30, 2024 | Balance, September 30, 2024 | | :-------------------------------- | :--------------------- | :-------------------------------------------- | :---------------------------------------------------- | :-------------------------------------------- | :---------------------------------------------------- | :-------------------------- | | Common Stock Shares | 3,319,032 | 125,958 | 45,406 | - | - | 3,490,396 | | Common Stock Amount | $3,319 | $126 | $45 | - | - | $3,490 | | Additional Paid in Capital | $130,797,634 | $1,036,247 | $378,056 | $1,066,668 | - | $133,278,605 | | Accumulated Deficit | $(133,096,568) | - | - | - | $(2,268,597) | $(135,365,164) | | Total | $(2,295,615) | $1,036,373 | $378,101 | $1,066,668 | $(2,268,597) | $(2,083,069) | - Total stockholders' deficit **improved from $(2,295,615) to $(2,083,069)** between June 30, 2024, and September 30, 2024, despite a net loss, primarily due to equity issuances and compensation[14](index=14&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit) (For the Nine Months Ended September 30, 2024 and 2023)](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)%20-%20Nine%20Months) This statement details changes in stockholders' equity, including stock issuances and net loss, for the nine months ended September 30 | Metric | Balance, December 31, 2023 | Private offering issuance of stock and warrants | Private offering issuance of stock and warrants – related parties | Employee and director equity-based compensation | Net loss for the nine months ended September 30, 2024 | Balance, September 30, 2024 | | :-------------------------------- | :------------------------- | :-------------------------------------------- | :---------------------------------------------------- | :-------------------------------------------- | :---------------------------------------------------- | :-------------------------- | | Common Stock Shares | 2,382,356 | 476,591 | 185,959 | 445,490 | - | 3,490,396 | | Common Stock Amount | $2,382 | $477 | $186 | $445 | - | $3,490 | | Additional Paid in Capital | $121,373,488 | $2,008,439 | $1,168,696 | $8,727,982 | - | $133,278,605 | | Accumulated Deficit | $(123,581,713) | - | - | - | $(11,783,451) | $(135,365,164) | | Total | $(2,205,843) | $2,008,916 | $1,168,882 | $8,728,427 | $(11,783,451) | $(2,083,069) | - For the nine months ended September 30, 2024, the company issued **476,591 shares and 185,959 shares to related parties** through private offerings, generating **$2,008,916 and $1,168,882** respectively[17](index=17&type=chunk) - Employee and director equity-based compensation totaled **$8,728,427** for the nine months ended September 30, 2024[17](index=17&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30 | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) operating activities | $(3,407,788) | $(5,084,160) | | Net cash provided by investing activities | $- | $- | | Net cash provided by financing activities | $3,292,811 | $4,769,540 | | Decrease in Cash | $(114,977) | $(314,620) | | Cash at End of Period | $159,403 | $1,484,644 | - Net cash used in operating activities **decreased by approximately $1.7 million**, from $(5,084,160) in 2023 to $(3,407,788) in 2024[19](index=19&type=chunk) - Net cash provided by financing activities **decreased by approximately $1.5 million**, from $4,769,540 in 2023 to $3,292,811 in 2024[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies, debt, equity, and other significant financial items [NOTE 1 - BASIS OF PRESENTATION](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION) This note outlines the basis of financial statement presentation, including going concern considerations - The Company has incurred net losses since inception, experienced negative cash flows from operations for the quarter ended September 30, 2024, and has an accumulated deficit of **$135,365,164**[25](index=25&type=chunk) - These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the financial statements are issued[27](index=27&type=chunk) - The Company intends to fund ongoing activities by utilizing current cash on hand and by raising additional capital through equity and/or debt financings[26](index=26&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the key accounting policies used in preparing the financial statements - The Company accounts for stock-based compensation in accordance with FASB ASC 718, recognizing expense over the requisite service period based on fair value at grant date[28](index=28&type=chunk) - Warrants are accounted for in accordance with FASB ASC 815, with fair value determined at issuance using the Black Scholes option valuation model[29](index=29&type=chunk) - The FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, effective for the Company for the year ending December 31, 2027, requiring additional disclosures about specified expense categories[30](index=30&type=chunk) [NOTE 3 - DEBT](index=7&type=section&id=NOTE%203%20-%20DEBT) This note details the company's debt obligations, including loan terms and outstanding balances - On March 5, 2024, the Company entered into a short-term unsecured loan of **$517,560** at an **8.5% annual rate**, with a principal balance of **$115,014** outstanding as of September 30, 2024[31](index=31&type=chunk) - A similar loan of **$605,600** from February 14, 2023, at an **8.4% annual rate**, was fully paid by November 9, 2023[32](index=32&type=chunk) [NOTE 4 - DEFERRED R&D OBLIGATIONS - PARTICIPATION AGREEMENTS](index=7&type=section&id=NOTE%204%20-%20DEFERRED%20R%26D%20OBLIGATIONS%20-%20PARTICIPATION%20AGREEMENTS) This note explains the accounting for deferred research and development obligations from participation agreements - For the three and nine months ended September 30, 2024, the Company recognized **$0** as a contra R&D expense related to participation agreements, compared to **$189,680 and $624,110** respectively in 2023[33](index=33&type=chunk)[34](index=34&type=chunk) [NOTE 5 - STOCKHOLDERS' EQUITY (DEFICIT)](index=8&type=section&id=NOTE%205%20-%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note provides details on equity transactions, including stock sales, warrants, and compensation [Equity Sales](index=8&type=section&id=Equity%20Sales) This section details the company's private equity sales and proceeds generated - During the three months ended September 30, 2024, the Company sold **171,364 shares of common stock** in private transactions, generating **$1,414,474** in proceeds, including **$378,101** from related parties[35](index=35&type=chunk) - For the nine months ended September 30, 2024, total proceeds from private unregistered transactions were **$3,177,798 for 662,550 shares**, with **$1,168,882** from related parties[36](index=36&type=chunk) [Warrants](index=8&type=section&id=Warrants) This section provides information on warrants issued by the company - In the three months ended September 30, 2024, the Company issued warrants to purchase **17,134 shares of common stock**, including **4,540** to related parties[37](index=37&type=chunk) - For the nine months ended September 30, 2024, **17,832 warrants** were issued, with **5,238** to related parties[38](index=38&type=chunk) [Equity Compensation](index=8&type=section&id=Equity%20Compensation) This section details stock-based compensation expenses and equity incentive plans - Stock-based compensation expense for the quarter ended September 30, 2024, was **$1,066,668**, with **$106,236** related to R&D and **$960,432** for G&A[40](index=40&type=chunk) - For the nine months ended September 30, 2024, total equity compensation expense was **$8,728,427**, including **$2,166,464** for R&D and **$6,561,963** for G&A[41](index=41&type=chunk) - On June 5, 2024, **127,364 restricted stock shares** were granted to non-employee directors to replace 62,451 outstanding options, resulting in **$697,501** expense for the nine months ended September 30, 2024[44](index=44&type=chunk) - The Board approved granting **261,619 common stock RSAs** to non-employee directors in lieu of **$172,670** unpaid fees for 2023, recognizing **$1,619,184** of expense for the nine months ended September 30, 2024[46](index=46&type=chunk)[48](index=48&type=chunk) - During the nine months ended September 30, 2024, the Company awarded options underlying **1,031,425 shares** to executives and employees, recognizing **$5,999,589** in compensation expense[51](index=51&type=chunk) - The 2024 Equity Incentive Plan for Non-Employee Directors was adopted on May 31, 2024, authorizing up to **875,000 shares**, with automatic annual increases[56](index=56&type=chunk) - The 2021 Equity Incentive Plan was amended on May 31, 2024, increasing available shares to **1,000,000**[61](index=61&type=chunk) [Common Stock Options Summary](index=11&type=section&id=Common%20Stock%20Options%20Summary) This table summarizes common stock options outstanding, issued, and their exercise prices | Metric | September 30, 2024 | September 30, 2023 | | :----------------------- | :------------------- | :------------------- | | Number of Options Outstanding, beginning of year | 292,515 | 281,637 | | Weighted Average Exercise Price, beginning of year | $35.56 | $36.29 | | Number of Options Issued | 1,031,425 | 10,878 | | Weighted Average Exercise Price, Issued | $7.96 | $16.74 | | Number of Options Outstanding, end of period | 1,031,425 | 292,515 | | Weighted Average Exercise Price, end of period | $7.96 | $35.56 | - As of September 30, 2024, there is no intrinsic value in any outstanding options as the market price is lower than the exercise price[64](index=64&type=chunk) [Common Stock Warrants - Unregistered Summary](index=12&type=section&id=Common%20Stock%20Warrants%20-%20Unregistered%20Summary) This table summarizes unregistered common stock warrants, including issuances and expirations | Metric | September 30, 2024 | September 30, 2023 | | :----------------------- | :------------------- | :------------------- | | Number of Warrants Outstanding, beginning of year | 671,448 | 267,013 | | Weighted Average Exercise Price, beginning of year | $21.59 | $47.10 | | Number of Warrants Issued | 17,832 | 642,397 | | Weighted Average Exercise Price, Issued | $8.24 | $14.82 | | Number of Warrants Expired | (25,690) | (105,390) | | Weighted Average Exercise Price, Expired | $46.05 | $47.24 | | Number of Warrants Outstanding, end of period | 663,590 | 804,020 | | Weighted Average Exercise Price, end of period | $20.28 | $21.29 | [Common Stock Warrants - Registered Summary](index=12&type=section&id=Common%20Stock%20Warrants%20-%20Registered%20Summary) This table summarizes registered common stock warrants, including outstanding numbers and exercise prices | Metric | September 30, 2024 | September 30, 2023 | | :----------------------- | :------------------- | :------------------- | | Number of Warrants Outstanding, beginning of year | 495,917 | 495,917 | | Weighted Average Exercise Price, beginning of year | $33.00 | $33.00 | | Number of Warrants Outstanding, end of period | 495,917 | 495,917 | | Weighted Average Exercise Price, end of period | $33.00 | $33.00 | [NOTE 6 - COMMITMENTS AND CONTINGENCIES](index=13&type=section&id=NOTE%206%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's contractual commitments and potential legal contingencies - The Company has compensation agreements with its President/CEO and CFO[70](index=70&type=chunk) - On September 13, 2024, the Company entered into a 63-month operating lease for a new corporate office in Troy, Michigan, commencing January 1, 2025, with total rent of **$298,135**[71](index=71&type=chunk) - Management is not aware of any pending legal matters that would have a material adverse effect on the Company's financial condition[72](index=72&type=chunk) [NOTE 7 - INCOME TAX](index=13&type=section&id=NOTE%207%20-%20INCOME%20TAX) This note details the company's income tax position, including deferred tax assets and valuation allowances - The Company has recorded a full valuation allowance against its net deferred tax asset, as it does not expect to realize it[73](index=73&type=chunk) - Income tax expense is expected to be **$0** for 2024 due to the full valuation allowance[74](index=74&type=chunk) [NOTE 8 - SUBSEQUENT EVENTS](index=13&type=section&id=NOTE%208%20-%20SUBSEQUENT%20EVENTS) This note describes significant events that occurred after the reporting period - On November 12, 2024, the Company restructured **$240,000** in outstanding convertible debt and **$36,853** in accrued interest into three new non-convertible notes totaling **$277,254**, with a 24-month term and **1% annual interest**[76](index=76&type=chunk) - Since October 1, 2024, the Company sold **55,939 common shares** and warrants for **5,592 shares** in five private transactions, raising **$910,000**, including **$150,000** from related parties[77](index=77&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition, operational results, capital resources, and critical accounting policies for the reporting periods [Special Note Regarding Forward-Looking Statements](index=14&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This note cautions readers about forward-looking statements and associated risks and uncertainties - The report contains forward-looking statements regarding the Company's ability to raise funds, generate revenue, achieve profitability, product regulation, market acceptance, testing results, licensing fees, and financial condition[77](index=77&type=chunk)[81](index=81&type=chunk) - Readers are cautioned not to place undue reliance on these statements due to known and unknown risks and uncertainties, as actual results may differ materially[78](index=78&type=chunk) [Overview](index=14&type=section&id=Overview) This section provides a general description of ZIVO's biotech and agtech business, products, and strategic initiatives - ZIVO is a research and development company in biotech and agtech, with an intellectual property portfolio of proprietary algal and bacterial strains, bioactive molecules, and production techniques[80](index=80&type=chunk) - In biotech, ZIVO is developing bioactive compounds from its algal culture for human and animal diseases, with a primary focus on a product candidate for coccidiosis in broiler chickens due to its market potential and shorter clinical testing cycle[81](index=81&type=chunk)[83](index=83&type=chunk) - In agtech, ZIVO's algal biomass, produced in Peru, contains Vitamin A, protein, iron, and other micronutrients, positioning it as a functional food ingredient and nutritional enhancement for human and animal use, and for skin care products[84](index=84&type=chunk) - The Company is working towards commercial-scale algae production and has engaged an independent distributor, ZWorldwide, Inc., to sell its Zivolife™ branded product in the North American green powder food market[85](index=85&type=chunk)[86](index=86&type=chunk) - Pending additional funding, ZIVO may pursue other indications including treatments for bovine mastitis, canine joint health, human immune modulation, companion animal food ingredients, and skin health applications[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) [Results of Operations for the three months ended September 30, 2024 and 2023](index=15&type=section&id=Results%20of%20Operations%20for%20the%20three%20months%20ended%20September%2030,%202024%20and%202023) This section analyzes the company's financial performance for the three months ended September 30, comparing current and prior year results | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Total revenue | $31,500 | $11,800 | $19,700 | 166.9% | | Total cost of goods sold | $22,050 | $7,670 | $14,380 | 187.5% | | Gross margin | $9,450 | $4,130 | $5,320 | 128.8% | | Research and development | $326,361 | $220,653 | $105,708 | 47.9% | | General and administrative | $1,943,127 | $1,355,865 | $587,262 | 43.3% | | Total costs and expenses | $2,269,487 | $1,576,518 | $692,969 | 43.9% | | Loss from operations | $(2,260,037) | $(1,572,388) | $(687,649) | 43.7% | | Net loss | $(2,268,597) | $(1,824,922) | $(443,675) | 24.3% | - Revenue **increased by approximately $20,000** due to increased product volume sold, attributable to production capacity increases in Peru[91](index=91&type=chunk) - General and administrative expenses **increased by approximately $600,000**, primarily due to a **$295,000 increase in non-cash equity-related compensation** for employees and a **$370,000 increase in professional services**, mainly for directors' equity compensation[93](index=93&type=chunk) - Research and development expenses **increased by approximately $105,000**, with gross R&D spending up by **$85,000** (excluding prior year amortization of deferred R&D obligations)[94](index=94&type=chunk)[95](index=95&type=chunk) [Results of Operations for the nine months ended September 30, 2024 and 2023](index=17&type=section&id=Results%20of%20Operations%20for%20the%20nine%20months%20ended%20September%2030,%202024%20and%202023) This section analyzes the company's financial performance for the nine months ended September 30, comparing current and prior year results | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total revenue | $67,220 | $15,850 | $51,370 | 324.1% | | Total costs of goods sold | $45,268 | $8,371 | $36,897 | 440.8% | | Gross margin | $21,952 | $7,479 | $14,473 | 193.5% | | Research and development | $2,891,452 | $1,064,563 | $1,826,889 | 171.6% | | General and administrative | $8,895,978 | $4,309,343 | $4,586,635 | 106.4% | | Total costs and expenses | $11,787,430 | $5,373,906 | $6,413,524 | 119.3% | | Loss from operations | $(11,765,478) | $(5,366,427) | $(6,399,051) | 119.2% | | Net loss | $(11,783,451) | $(5,868,637) | $(5,914,814) | 100.8% | - Revenue **increased by approximately $51,500**, primarily due to higher sales volumes from increased production capacity in Peru[99](index=99&type=chunk) - General and administrative expenses **increased by approximately $4.6 million**, driven by a **$3.1 million increase in labor-related costs** (mainly non-cash equity compensation) and a **$1.7 million increase in professional services** (mainly directors' compensation)[101](index=101&type=chunk) - Research and development expenses **increased by approximately $1.8 million**, with gross R&D spending up by **$1.2 million** (excluding prior year amortization), primarily due to a **$1.8 million increase in labor and internal lab costs** (mainly non-cash compensation)[102](index=102&type=chunk)[103](index=103&type=chunk) [Capital Resources](index=18&type=section&id=Capital%20Resources) This section discusses the company's liquidity, funding sources, and future capital requirements - As of September 30, 2024, ZIVO's principal source of liquidity was **$159,403 in cash**[106](index=106&type=chunk) - The Company expects to incur significant operating losses and requires additional funding to cover expenses, historically relying on common stock, warrants, and debt issuances[106](index=106&type=chunk) - In the nine months ended September 30, 2024, the Company raised approximately **$3.2 million** from direct sales of **662,550 common stock shares** in private transactions[106](index=106&type=chunk) - The 2024 Private Offering, initiated in June 2024, has resulted in the sale of **171,364 common shares** and **17,134 warrant shares** for proceeds of **$1,414,474**[109](index=109&type=chunk) - The Company estimates a need for approximately **$6.0 million in cash** over the next 12 months for basic operations, excluding R&D, indicating a near-term need for additional funding[118](index=118&type=chunk) [Statement of Cash Flows](index=19&type=section&id=Statement%20of%20Cash%20Flows) This section provides a detailed analysis of cash flows from operating, investing, and financing activities - Operating activities **used $3.4 million in cash** during the nine months ended September 30, 2024, a **decrease of $1.7 million** compared to the prior year[114](index=114&type=chunk) - Financing activities **generated $3.3 million in cash** during the nine months ended September 30, 2024, a **decrease of $1.5 million** from the prior year[116](index=116&type=chunk) - In 2024, financing cash was primarily from **$3.2 million in equity sales** and **$100,000 net from a short-term financing agreement**[116](index=116&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=20&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section outlines the key accounting policies and estimates requiring significant management judgment - The preparation of financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts, which are based on historical experience and reasonable assumptions[119](index=119&type=chunk) - There have been no material changes to the critical accounting estimates previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[120](index=120&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable for smaller reporting companies - Quantitative and qualitative disclosures about market risk are not applicable for smaller reporting companies[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates the company's disclosure controls and internal control over financial reporting, addressing identified material weaknesses and remediation plans [Evaluation of Disclosure Controls and Procedures](index=20&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section presents the CEO and CFO's conclusion on the effectiveness of disclosure controls and procedures - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of September 30, 2024, due to material weaknesses identified in the 2023 Annual Report on Form 10-K[122](index=122&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=20&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This report outlines management's responsibility for internal control and the identified material weaknesses - Management is responsible for establishing and maintaining adequate internal control over financial reporting[123](index=123&type=chunk) - Internal control over financial reporting may not detect or prevent misstatements due to inherent limitations[124](index=124&type=chunk) - Material weaknesses identified as of December 31, 2023, continued to exist as of September 30, 2024[125](index=125&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=21&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section details the specific material weaknesses identified in the company's internal control over financial reporting - Material weaknesses include a lack of structure, insufficient qualified resources, and inadequate oversight in the control environment, risk assessment, and monitoring[127](index=127&type=chunk) - Additional material weaknesses exist in control activities and information and communication, specifically regarding information technology general controls (user access, vendor management, segregation of duties) and the design/documentation of formal accounting policies and procedures[128](index=128&type=chunk)[131](index=131&type=chunk) - Management did not identify controls over the accounting, classification, and application of US GAAP for income taxes, stock-based compensation, and deferred R&D obligations[131](index=131&type=chunk) - Management concluded that internal control over financial reporting was **not effective** as of September 30, 2024, potentially leading to material misstatements[130](index=130&type=chunk) [Remediation Plans](index=22&type=section&id=Remediation%20Plans) This section describes management's plans to address and remediate the identified material weaknesses - Remediation actions include developing training programs, implementing a risk assessment process, creating comprehensive accounting policies and procedures, enhancing documentation for management review controls, engaging outside resources for complex accounting, and developing monitoring activities[133](index=133&type=chunk)[137](index=137&type=chunk) - Other remediation efforts involve segregating key functions, reassessing and formalizing IT security and change management policies, and continuously enhancing accounting, business operations, and IT policies[137](index=137&type=chunk) [PART II - OTHER INFORMATION](index=28&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The Company may be subject to litigation in the normal course of business but is not currently a party to any material legal proceedings - The Company is not currently a party to any material legal proceedings, nor is it aware of any pending or threatened legal proceedings that would have a material adverse effect[134](index=134&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have occurred in the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[135](index=135&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including common stock and related party transactions, and the use of proceeds [Common Stock](index=23&type=section&id=Common%20Stock) This section lists unregistered common stock sales to various investors and the proceeds received | Name | Date | Amount Received | Common Stock Shares | | :------------------------ | :------- | :-------------- | :------------------ | | Strome Mezzanine Fund II LP | 07-Jul-24 | $156,800.00 | 20,000 | | Strome Mezzanine Fund II LP | 24-Jul-24 | $201,250.00 | 25,000 | | Erik Klein | 22-Aug-24 | $250,000.00 | 29,976 | | Brenden Storm | 22-Aug-24 | $150,000.00 | 17,985 | | Sean Sanford | 22-Aug-24 | $25,000.00 | 2,997 | | Strome Mezzanine Fund II LP | 27-Aug-24 | $253,322.60 | 30,000 | | Erik Klein | 17-Oct-24 | $525,000.00 | 32,196 | | Grant Glitz | 17-Oct-24 | $50,000.00 | 3,066 | | Brenden Storm | 18-Oct-24 | $185,000.00 | 11,201 | - The Company issued common stock in unregistered transactions to various investors, with proceeds used for general corporate purposes[139](index=139&type=chunk) [Common Stock – Related Parties](index=23&type=section&id=Common%20Stock%20%E2%80%93%20Related%20Parties) This section lists unregistered common stock sales involving related parties and the proceeds received | Name | Date | Amount Received | Common Stock Shares | | :-------------- | :------- | :-------------- | :------------------ | | Chris Maggiore | 24-Jul-24 | - | 2,080 | | Alison Cornell | 22-Aug-24 | $100,000.00 | 11,990 | | Chris Maggiore | 22-Aug-24 | $200,000.00 | 31,336 | | John B. Payne | 16-Oct-24 | $100,000.00 | 6,343 | | HEP Investments, LLC | 16-Oct-24 | $50,000.00 | 3,133 | - Related parties participated in unregistered common stock sales, including exchanges for accounts payable and direct purchases, with proceeds contributing to general corporate purposes[139](index=139&type=chunk) [Item 3. Defaults upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable to the Company - This item is not applicable[140](index=140&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable[141](index=141&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[142](index=142&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant forms, equity plans, and certifications - The exhibits include organizational documents (Articles of Incorporation, By-laws), various warrant forms (Series A, Series B, Pre-Funded), and equity incentive plans (2024 Equity Incentive Plan for Non-Employee Directors, Amended Non-Employee Director Compensation Policy, First Amendment to 2021 Equity Incentive Plan)[144](index=144&type=chunk)[145](index=145&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 and U.S.C. Section 1350 are furnished[145](index=145&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File Number: 001-40449 Zivo Bioscience, Inc. (Exact name of registrant as specified in its charter) Nevada 87-0699977 (State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Commission File Number: 001-40449 Zivo Bioscience, Inc. (Exact name of registrant as specified in its charter) FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Nevada 87-0699977 (Stat ...

[PART I.](index=4&type=section&id=PART%20I.) [Business](index=4&type=section&id=Item%201.%20Business) ZIVO BIOSCIENCE, INC. is a research and development company operating in both the biotech and agtech sectors, focusing on proprietary algal and bacterial strains for human and animal health applications [Overview](index=4&type=section&id=Overview) - ZIVO is a research and development company in biotech and agtech, holding an intellectual property portfolio of proprietary algal and bacterial strains and related technologies for human and animal health applications[22](index=22&type=chunk) - The company's strategy is centered on two initiatives: identifying bioactive extracts/molecules from proprietary algal culture to treat diseases and utilizing whole algal culture as a nutritional food product[23](index=23&type=chunk)[27](index=27&type=chunk) [Biotech (Therapeutic) Business Strategy](index=5&type=section&id=Biotech%20(Therapeutic)%20Business%20Strategy) - The biotech strategy aims to develop bioactive extracts from proprietary algal culture for human and animal diseases, seeking strategic partners for late-stage development and commercialization[27](index=27&type=chunk)[28](index=28&type=chunk) - The primary focus is on treating coccidiosis in broiler chickens, driven by the disease's global prevalence, the lack of effective non-antibiotic alternatives, and a shorter clinical testing cycle[29](index=29&type=chunk) - ZIVO's coccidiosis product candidate is an innovative non-antibiotic immune modulator that augments the chicken's immune system, addressing industry and consumer concerns about residual antibiotics[30](index=30&type=chunk)[31](index=31&type=chunk)[33](index=33&type=chunk) [Coccidiosis Product Candidate](index=5&type=section&id=Coccidiosis%20Product%20Candidate) - ZIVO's coccidiosis product candidate has demonstrated multiple benefits in studies, including improved digestive health, reduced incidence of key food-borne illness pathogens without antibiotics, and reduced mortality in broiler chickens[32](index=32&type=chunk)[34](index=34&type=chunk) [Agtech (Nutrition) Business Strategy](index=5&type=section&id=Agtech%20(Nutrition)%20Business%20Strategy) - The nutrition business strategy prioritizes developing cost-effective, commercial-scale growing technology for its proprietary algal culture, which is a **high-protein (over 50%)** nutritional product[34](index=34&type=chunk)[35](index=35&type=chunk) - A collaboration with Grupo Alimenta in Peru has achieved continuous production of high-quality dried algae, with plans to reach **100,000 kg/year capacity by late 2025**[36](index=36&type=chunk) - Commercial shipments of dried green algae powder for human consumption under the Zivolife™ brand began in **June 2023**, distributed by ZWorldwide, Inc. in the North American green powder food market[38](index=38&type=chunk) [Additional Indications](index=6&type=section&id=Additional%20Indications) - Additional biotech indications include bovine mastitis, canine joint health (potential chondroprotective effect), and human immune modulation (potential application in multiple disease situations)[39](index=39&type=chunk)[41](index=41&type=chunk) - Additional agtech indications include companion animal food ingredients (leveraging GRAS status), skin health ingredients (topical and ingestible), and New Dietary Ingredient (NDI) applications for human dietary supplements[40](index=40&type=chunk)[41](index=41&type=chunk) [Our Market Opportunity](index=7&type=section&id=Our%20Market%20Opportunity) - The animal health market for vaccines, phytogenics, eubiotics, drugs, and feed additives is substantial, with annual market sizes ranging from **$753 million to $11.8 billion** in recent years[42](index=42&type=chunk) - Key therapeutic market opportunities include poultry gut health (coccidiosis, driven by consumer/regulatory pressure for non-antibiotic alternatives), bovine mastitis (affecting **1.5 million US dairy cows annually**, current treatments are antibiotic-based), and canine joint health (over **20% prevalence of osteoarthritis** in pet dogs)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - The human immune modification market is vast, with antibiotics, eubiotics, autoimmune, and antidiabetic markets ranging from **$37.9 billion to $110 billion**, indicating significant potential for immune modulators[46](index=46&type=chunk) - The human functional food ingredients market is growing due to demand for healthy, plant-based proteins and microbiome-enhancing foods, aligning with ZIVO's algal biomass product[47](index=47&type=chunk) [Clinical Development and Regulatory Pathway](index=7&type=section&id=Clinical%20Development%20and%20Regulatory%20Pathway) - ZIVO's dried algal biomass has achieved self-affirmed Generally Regarded as Safe (GRAS) status for human food applications in the U.S., allowing commercialization with a consumption limit of up to **nine grams per day**[49](index=49&type=chunk) - For poultry gut health, **21 clinical trials** have been conducted, with the most recent 42-day coccidiosis challenge study demonstrating statistically significant reductions in intestinal damage and improved Feed Conversion Ratio (FCR) comparable to market-leading commercial ionophores[51](index=51&type=chunk)[53](index=53&type=chunk) - The USDA's Center for Veterinary Biologics (CVB) has claimed jurisdiction for reviewing ZIVO's immune-modulating biologic for treating coccidiosis in broiler chickens, which is a significant milestone that de-risks the regulatory path and suggests a favorable timeline to approval compared to FDA[54](index=54&type=chunk)[55](index=55&type=chunk) [Potential Additional Indications](index=8&type=section&id=Potential%20Additional%20Indications) - For bovine mastitis, ZIVO has conducted multiple in vitro/ex vivo experiments and **four clinical trials**, with plans for further validation studies[56](index=56&type=chunk) - Canine joint health development includes in vitro inflammatory experiments, **two in vivo mouse trials**, and **two ex vivo canine hip joint tissue experiments**, with additional ex vivo and in vivo studies planned[57](index=57&type=chunk) - Human immune modulation studies involve **six in vitro experiments** using human immune cells with a proprietary TLR4 inhibitor, with further in vitro testing planned[57](index=57&type=chunk) - For human consumption, ZIVO is reviewing GRAS status for updates and studies to increase the allowable daily intake (ADI), and planning studies to support skin health/anti-aging claims for NDI applications[57](index=57&type=chunk) [Competition and Functional Equivalents](index=9&type=section&id=Competition%20and%20Functional%20Equivalents) - The animal health industry is highly competitive, with major players like HuvePharma, Elanco, Zoetis, and Phibro dominating the poultry gut health market with conventional anticoccidial compounds[58](index=58&type=chunk)[59](index=59&type=chunk) - Competition in bovine mastitis includes branded antibiotic solutions (ToDay™, Masti-Clear), homeopathic options (Amoxi-Mast™), topical treatments, and vaccines (Lysigin, Spectramast LC™)[60](index=60&type=chunk) - The human immune modulation market includes companies developing TLR4 inhibitors, with Eritoran and Resatorvid as lead candidates, some already in clinical trials[62](index=62&type=chunk) - For human food and food ingredients, ZIVO competes with established microalgae and green powder businesses (e.g., Earthrise, Cyanotech, AG1) and large food technology innovators (e.g., DSM, Cargill, Nestle)[63](index=63&type=chunk) [Material Agreements](index=10&type=section&id=Material%20Agreements) - On **April 3, 2023**, ZIVO entered a Subscription Agreement with its CEO for a **$1 million 10% promissory note** (Payne Note) and warrants to purchase **65,000 shares** of common stock[65](index=65&type=chunk) - On **June 30, 2023**, ZIVO engaged Maxim Group LLC as a placement agent for securities offerings, agreeing to pay a **7.0% cash fee** and reimburse expenses up to **$105,000**[68](index=68&type=chunk) - ZIVOLife LLC entered a Distribution Agreement with ZWorldwide, Inc. in **September 2022**, granting exclusive worldwide rights to sell Zivolife™ product for human use, amended in **July 2023** to include purchase commitments of entire supply for **18 months** and at least **2,000 kg/month for five years**[69](index=69&type=chunk)[70](index=70&type=chunk) - In **July 2023**, ZIVOLife LLC signed a binding Contract Manufacturing Term Sheet with Alimenta Algae SA, committing to purchase all Zivolife™ product produced by Alimenta, with Alimenta securing financing for capacity expansion[71](index=71&type=chunk)[72](index=72&type=chunk) - On **July 5, 2023**, ZIVO closed a Securities Purchase Agreement with an institutional investor, selling **171,666 shares** of common stock and **78,021 pre-funded warrants** for approximately **$4 million gross proceeds**[73](index=73&type=chunk) - On **November 16, 2023**, ZIVO entered a Subscription Agreement with HEP Investments, LLC for a **$150,000 10% promissory note**, which was repaid in full on **December 5, 2023**[74](index=74&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) - ZIVO relies on a combination of patents, trademarks, copyrights, and trade secrets to protect its intellectual property, including proprietary algal and bacterial strains, biologically active molecules, and production techniques[75](index=75&type=chunk) - The company holds multiple U.S. patents (e.g., U.S. Patent No. 7,807,622, 8,586,053, 8,791,060, 9,486,005, 10,161,928, 10,166,270, 10,232,028, 10,765,732, 10,842,179, 11,065,287) covering its proprietary algal culture, phyto-percolate compositions for disease treatment, immune modulation, and wellness monitoring[76](index=76&type=chunk)[79](index=79&type=chunk) - ZIVO also has granted Canadian and European patents (e.g., CA3014897, CA2631773, EP2538951, EP3258948, EP3897188) for nutritional support, disease treatment, and controlling coccidiosis and necrotic enteritis in poultry[79](index=79&type=chunk)[84](index=84&type=chunk) - Numerous patent applications are currently under prosecution in various countries for agents improving gut health, algal feed ingredients for coccidiosis/necrotic enteritis, use of specific microbes in disease prevention, enhancement of vaccine efficacy, immune priming, and maturation of immune/metabolic processes[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - The company has registered trademarks for "ZIVO" and "ZIVO Bioscience" in the US and China[95](index=95&type=chunk) [Government Regulation](index=19&type=section&id=Government%20Regulation) - ZIVO's dried algal biomass has self-affirmed GRAS status for human use, allowing commercialization as a food ingredient, with an updated dossier in **2023**[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The contract manufacturer, Alimenta Algae in Peru, has passed food safety and cGMP audits by Peruvian authorities and an FDA-certified third party, meeting requirements for importing food products into the U.S. via the FDA Foreign Supplier Verification Program (FSVP)[103](index=103&type=chunk)[104](index=104&type=chunk) - For dietary supplements, ZIVO is required to file a New Dietary Ingredient (NDI) Notification, which necessitates conducting at least one human study to support health benefits or claims[105](index=105&type=chunk)[106](index=106&type=chunk) - The company markets products with structure/function claims based on known composition and published studies, adhering to cGMP standards and supported by toxicology reports[108](index=108&type=chunk)[109](index=109&type=chunk) - For companion animal feed ingredients, specie-specific safety and health data are required, with plans to obtain GRAS affirmation, similar to human applications[113](index=113&type=chunk)[114](index=114&type=chunk) [Employees](index=20&type=section&id=Employees) - As of **December 31, 2023**, ZIVO had **8 full-time employees** covering various functions, supplemented by independent contractors[116](index=116&type=chunk) [Corporate Information](index=21&type=section&id=Corporate%20Information) - Zivo Bioscience, Inc. was incorporated in Nevada on **March 28, 1983**, and changed its name to Zivo Bioscience, Inc. on **October 14, 2014**, with the trading symbol ZIVO effective **November 10, 2014**[117](index=117&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) ZIVO faces substantial risks, including a history of operating losses and going concern uncertainty, requiring significant additional financing. Operational risks stem from reliance on a single algae grower and distributor, agricultural vulnerabilities, and dependence on key personnel [Risks Relating to Our Business](index=21&type=section&id=Risks%20Relating%20to%20Our%20Business) - ZIVO has a history of operating losses, with a net loss of **$7.8 million in 2023** and an accumulated deficit of **$123.6 million**, raising substantial doubt about its ability to continue as a going concern[125](index=125&type=chunk)[127](index=127&type=chunk)[296](index=296&type=chunk) - The company requires substantial additional financing to fund ongoing research, development, and commercialization efforts, with current cash balances insufficient for **12 months** of operations[127](index=127&type=chunk)[128](index=128&type=chunk)[213](index=213&type=chunk) - ZIVO's algae production is subject to agricultural risks like weather, disease, and contamination, which are unpredictable and can interrupt production[130](index=130&type=chunk)[131](index=131&type=chunk) - The company relies on a single contract manufacturer in Peru for algae production and a single distributor for marketing, posing material adverse risks if these relationships are terminated or disrupted[135](index=135&type=chunk)[136](index=136&type=chunk) - ZIVO is highly dependent on its executive team (CEO, CFO) and key scientific personnel, and faces challenges in attracting and retaining qualified individuals[138](index=138&type=chunk)[139](index=139&type=chunk) - Preclinical and clinical trial results are not necessarily predictive of future outcomes, and delays or unfavorable results could significantly harm product development and profitability[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Increased regulatory scrutiny of nutritional supplements and new regulations could impose additional restrictions, increase costs, or require product reformulation[145](index=145&type=chunk)[146](index=146&type=chunk) - Cybersecurity incidents could disrupt operations, compromise confidential information, and damage business relationships[148](index=148&type=chunk)[150](index=150&type=chunk) [Risks Relating to Our Intellectual Property](index=26&type=section&id=Risks%20Relating%20to%20Our%20Intellectual%20Property) - ZIVO's success depends on obtaining and enforcing patents and protecting trade secrets, but there's no assurance that pending patent applications will be granted or that existing patents will provide adequate protection or competitive advantage[155](index=155&type=chunk) - The company may incur significant time and money protecting or enforcing its patents, designing around others' patents, or licensing third-party rights, which could harm its business[156](index=156&type=chunk) - Claims of intellectual property infringement by or against ZIVO, regardless of merit, could consume management time, result in costly litigation, or delay product shipments[157](index=157&type=chunk)[158](index=158&type=chunk) [Risks Related to Our Common Stock](index=27&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - ZIVO's common stock was delisted from Nasdaq on **November 27, 2023**, and now trades on OTCQB, which may affect liquidity and lead to a decline in market price due to thin trading volume[159](index=159&type=chunk)[160](index=160&type=chunk) - The market price and trading volume of ZIVO's securities are volatile and can be affected by trial results, regulatory actions, financial performance, financing efforts, litigation, and general economic conditions[161](index=161&type=chunk) - Management identified material weaknesses in internal controls over financial reporting as of **December 31, 2023**, due to an ineffective overall control environment, potentially leading to material misstatements and loss of investor confidence[163](index=163&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - As a smaller reporting company and non-accelerated filer, ZIVO is subject to scaled disclosure requirements and is not required to provide an auditor attestation of internal controls, which may make it more challenging for investors to analyze its financial prospects[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Raising additional funds through debt or equity financing could result in dilution for existing stockholders and potentially cause the stock price to decline[172](index=172&type=chunk)[175](index=175&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not required for smaller reporting companies - Not required for smaller reporting companies[179](index=179&type=chunk) [Cybersecurity](index=30&type=section&id=Item%201C.%20Cybersecurity) ZIVO relies on third-party computer systems and software for its operations and data security, lacking in-house IT personnel. Management believes this is a prudent and cost-effective approach given the company's size and low cyber-risk profile [Risk Management and Strategy](index=30&type=section&id=Risk%20Management%20and%20Strategy) - ZIVO relies on standard operating systems and software from established third parties (Microsoft 365, QuickBooks, Paylocity) for cybersecurity, without in-house IT personnel[180](index=180&type=chunk) - Management believes this reliance on experienced third-party providers is prudent and cost-effective given the company's current size and relatively low cyber-risk profile[180](index=180&type=chunk) [Governance](index=30&type=section&id=Governance) - The board of directors stays informed on data privacy and information security issues[182](index=182&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) ZIVO leases its principal executive office (**4,800 sq ft**) in Bloomfield Hills, MI, and a laboratory and office (**2,700 sq ft**) in Fort Myers, FL. Existing facilities are considered adequate for current needs, with sufficient options available for future expansion - ZIVO leases its principal executive office (**4,800 sq ft**) in Bloomfield Hills, MI, and a laboratory/office (**2,700 sq ft**) in Fort Myers, FL[183](index=183&type=chunk)[184](index=184&type=chunk) - Existing facilities are deemed adequate for current needs, with future expansion options believed to be commercially reasonable[183](index=183&type=chunk) [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) On **April 20, 2023**, ZIVO settled an arbitration initiated by AEGLE Partners, 2 LLC for **$13,000**, related to a Supply Chain Consulting Agreement. The company may face other claims in the normal course of business, but management believes no current legal matters would have a material adverse effect - ZIVO settled an arbitration with AEGLE Partners, 2 LLC for **$13,000** on **April 20, 2023**, related to a Supply Chain Consulting Agreement[185](index=185&type=chunk) - Management believes no existing or future legal proceedings in the ordinary course of business will have a material adverse effect on the company's financial condition, results of operations, or cash flows[186](index=186&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[187](index=187&type=chunk) [PART II.](index=31&type=section&id=PART%20II.) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ZIVO's common stock trades on OTCQB under "ZIVO," and its public warrants trade on OTC Markets' Pink Sheets under "ZIVOW." As of **March 14, 2024**, there were approximately **209 holders of record**. The company has never paid cash dividends and does not anticipate doing so, planning to retain earnings for business expansion - ZIVO's common stock is quoted on OTCQB (symbol "ZIVO"), and public warrants on OTC Markets' Pink Sheets (symbol "ZIVOW")[189](index=189&type=chunk) - As of **March 14, 2024**, there were approximately **209 holders of record** of common stock[190](index=190&type=chunk) - The company has not paid cash dividends since inception and does not anticipate paying any in the foreseeable future, intending to retain earnings for business expansion[191](index=191&type=chunk) [Reserved](index=31&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved - This item is reserved[192](index=192&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) ZIVO's business model aims to generate income from licensing and selling natural bioactive ingredients derived from algae cultures. In **2023**, the company reported its first commercial revenue of **$27,650**, with a net loss of **$7.8 million**, an improvement from **$8.7 million** in **2022**. General and administrative and R&D expenses decreased. ZIVO's liquidity remains a concern, with only **$274,380** in cash as of **December 31, 2023**, and a need for substantial additional funding. Cash flows from operations improved, but financing activities were crucial for capital. Critical accounting estimates involve fair value measurements and stock-based compensation [Overview](index=31&type=section&id=Overview) - ZIVO's business model focuses on licensing and selling natural bioactive ingredients from proprietary algae cultures to animal and human health, food, dietary supplement, and skin care manufacturers[193](index=193&type=chunk) - Anticipated income streams include sales of algal biomass/extracts and license payments (royalties/contractual payments) for bioactive ingredients and fractions[193](index=193&type=chunk)[194](index=194&type=chunk) - The manufacturing strategy involves using contract manufacturers for non-licensed products and licensing bioactive fractions/molecules as lead compounds for therapeutic applications[194](index=194&type=chunk) [Financial Overview](index=32&type=section&id=Financial%20Overview) - General and administrative expenses, comprising personnel, professional fees (legal, IP, regulatory, financial), and overhead, are expected to increase significantly to support R&D, commercialization, and public company operations[195](index=195&type=chunk)[196](index=196&type=chunk) - Research and development expenses, expensed as incurred, include personnel, lab supplies, clinical trials, regulatory operations, and consultant fees, and are projected to increase substantially with further product development[197](index=197&type=chunk)[198](index=198&type=chunk) - Interest expense primarily relates to convertible notes and short-term debt[199](index=199&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Results of Operations Summary (Year Ended December 31) | Metric | 2023 ($) | 2022 ($) | Change (2023 vs 2022) ($) | | :-------------------------------- | :----------- | :----------- | :-------------------- | | Total Revenue | $27,650 | $0 | +$27,650 | | Total Cost of Goods Sold | $16,040 | $0 | +$16,040 | | Gross Margin | $11,610 | $0 | +$11,610 | | General and Administrative Expenses | $5,897,594 | $6,491,704 | -$594,110 | | Research and Development Expenses | $1,377,028 | $2,240,270 | -$863,242 | | Total Costs and Expenses | $7,274,622 | $8,731,974 | -$1,457,352 | | Loss from Operations | $(7,263,012) | $(8,731,974) | +$1,468,962 | | Total Interest and Other (Expense), net | $(514,172) | $(13,319) | -$500,853 | | Net Loss | $(7,777,184) | $(8,745,293) | +$968,109 | - Commercial revenue of **$27,650** was recorded in **2023** from sales of dried algal biomass, a significant increase from **$0 in 2022**[202](index=202&type=chunk) - General and administrative expenses decreased by approximately **$600,000** in **2023** compared to **2022**, primarily due to a **$750,000 non-cash decrease** in stock options for employees and an **$820,000 decrease** in directors' fees, partially offset by increases in cash compensation, accounting, and legal fees[204](index=204&type=chunk) - Research and development expenses decreased by **$0.8 million** in **2023** to **$1.4 million**, mainly due to lower internal costs (**$325,000 decrease**) and reduced third-party research spending (**$610,000 decrease**), along with a **$701,332 reduction** from amortization of deferred R&D obligations[205](index=205&type=chunk)[206](index=206&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and Liquidity (As of December 31) | Metric | 2023 ($) | 2022 ($) | | :-------------------- | :----------- | :----------- | | Cash Deposits | $274,380 | $1,799,263 | - ZIVO has incurred significant expenses and operating losses since inception, leading to substantial doubt about its ability to continue as a going concern[207](index=207&type=chunk)[213](index=213&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk) - The company's historical cash sources include proceeds from notes, common stock issuances (with/without warrants), unsecured loans, and Participation Agreements[209](index=209&type=chunk) - In **2023**, ZIVO received **$2,384,200** in unsecured loans (fully repaid) and **$4,640,000** from private placements of common stock[210](index=210&type=chunk)[211](index=211&type=chunk) - ZIVO estimates a need for approximately **$5 million** in cash over the next **12 months** for basic operations (excluding R&D) and faces a near-term need for additional funding[219](index=219&type=chunk) [Cash Flows](index=34&type=section&id=Cash%20Flows) Cash Flows Summary (Year Ended December 31) | Activity | 2023 ($) | 2022 ($) | | :------------------------------------ | :------------- | :------------- | | Net cash used in operating activities | $(5,799,893) | $(7,102,612) | | Net cash used in investing activities | $0 | $0 | | Net cash provided by financing activities | $4,275,010 | $0 | | Net increase (decrease) in cash and cash equivalents | $(1,524,883) | $(7,102,612) | | Cash at end of period | $274,380 | $1,799,263 | - Cash used in operating activities decreased by approximately **$1.3 million** in **2023** to **$5.8 million**, driven by a **$900,000 decrease** in net loss, a **$1.3 million decrease** in non-cash expenses, and a **$1.7 million increase** from changes in assets and liabilities (accrued liabilities, accounts payable)[216](index=216&type=chunk)[219](index=219&type=chunk) - Financing activities generated **$4.3 million** in **2023**, primarily from a **$3.6 million private placement** of stock and warrants and **$640,000** from other private placements of common stock[218](index=218&type=chunk)[219](index=219&type=chunk) - The company's cash balance decreased by **$1.5 million** in **2023**, ending the year at **$274,380**[219](index=219&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) - Critical accounting estimates involve fair value measurements of financial instruments, particularly convertible notes, which use Level 3 unobservable inputs[222](index=222&type=chunk)[223](index=223&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - The company evaluates complex financial instruments for embedded derivatives, separating and accounting for them at fair market value[225](index=225&type=chunk) - Stock-based compensation is recognized at grant-date fair value using the Black-Scholes option pricing model, which requires subjective assumptions like expected volatility and term[226](index=226&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) - ZIVO adopted ASU 2016-13 (Measurement of Credit Losses on Financial Instruments) and ASU 2020-06 (Debt with Conversion and Other Options) effective **January 1, 2023**[321](index=321&type=chunk)[322](index=322&type=chunk) - Neither ASU 2016-13 nor ASU 2020-06 had a material impact on the company's financial statements or diluted earnings per share for the year ended **December 31, 2023**[321](index=321&type=chunk)[322](index=322&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for smaller reporting companies - Not required for smaller reporting companies[228](index=228&type=chunk) [PART III.](index=36&type=section&id=PART%20III.) [Financial Statements and Supplementary Data](index=36&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the Consolidated Financial Statements, Reports, and Notes starting on page F-1 of the report - Consolidated Financial Statements, Reports, and Notes are incorporated by reference, starting on page F-1[229](index=229&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=36&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Information regarding changes in and disagreements with accountants on accounting and financial disclosure is incorporated by reference from the Registrant's **2023** Proxy Statement - Information is incorporated by reference from the **2023** Proxy Statement regarding the ratification of the independent registered public accounting firm[230](index=230&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%209A.%20Controls%20and%20Procedures) ZIVO's management concluded that its disclosure controls and procedures were not effective as of **December 31, 2023**, due to identified material weaknesses in internal control over financial reporting. These weaknesses stem from an ineffective overall control environment, deficiencies in IT general controls, and inadequate formal accounting policies and controls over complex areas like income tax and stock-based compensation. Management is actively implementing remediation measures, including training, risk assessment, documentation, and segregation of duties [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of **December 31, 2023**, ZIVO's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[231](index=231&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=36&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) - Management is responsible for establishing and maintaining adequate internal control over financial reporting[232](index=232&type=chunk) - An assessment using the COSO framework as of **December 31, 2023**, identified material weaknesses, leading to the conclusion that internal control over financial reporting was not effective[234](index=234&type=chunk)[238](index=238&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=37&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) - Material weaknesses include ineffective entity-level controls impacting the control environment, risk assessment, and monitoring activities[237](index=237&type=chunk) - Deficiencies exist in information technology general controls (user access, vendor management, segregation of duties) and the design/maintenance of formal accounting policies, procedures, and controls across business processes[238](index=238&type=chunk) - Specific control weaknesses were identified in the accounting, classification, and application of US GAAP for income taxes (valuation analysis, footnote preparation), stock-based compensation (valuation of options), and deferred research and development obligations[238](index=238&type=chunk) [Remediation](index=38&type=section&id=Remediation) - Remediation actions include developing training, implementing risk assessment, creating internal controls documentation, enhancing management review policies, engaging external resources for complex accounting, segregating key functions, and reassessing IT security and change management controls[244](index=244&type=chunk) [Changes in Internal Control Over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No other material changes in internal control over financial reporting occurred during the quarter, apart from the identified material weaknesses[241](index=241&type=chunk) [Other Information](index=38&type=section&id=Item%209B.%20Other%20Information) This item reports that there is no other information to disclose - None[242](index=242&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=38&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[243](index=243&type=chunk) [Directors, Executive Officers and Corporate Governance](index=39&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Registrant's **2024** Proxy Statement - Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the **2024** Proxy Statement[245](index=245&type=chunk) [Executive Compensation](index=39&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding Executive Compensation is incorporated by reference from the Registrant's **2024** Proxy Statement - Information regarding Executive Compensation is incorporated by reference from the **2024** Proxy Statement[246](index=246&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=39&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is incorporated by reference from the Registrant's **2024** Proxy Statement - Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is incorporated by reference from the **2024** Proxy Statement[247](index=247&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=39&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding Certain Relationships and Related Transactions, and Director Independence is incorporated by reference from the Registrant's **2024** Proxy Statement - Information regarding Certain Relationships and Related Transactions, and Director Independence is incorporated by reference from the **2024** Proxy Statement[248](index=248&type=chunk) [Principal Accountant Fees and Services](index=39&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information about aggregate fees billed by BDO USA, P.C. is incorporated by reference from the "Independent Auditor Fees" caption in the **2024** Proxy Statement - Information about aggregate fees billed by the principal accountant, BDO USA, P.C., is incorporated by reference from the "Independent Auditor Fees" caption in the **2024** Proxy Statement[249](index=249&type=chunk) [PART IV.](index=39&type=section&id=PART%20IV.) [Exhibits and Financial Statement Schedules](index=39&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and supplementary data, noting that all schedules are omitted as the information is included elsewhere. It also provides a detailed list of exhibits, including articles of incorporation, by-laws, warrant forms, incentive plans, and various agreements, along with certifications and XBRL documents - Financial statements begin on page F-1, and all schedules are omitted as the required information is included in the Consolidated Financial Statements or Notes[251](index=251&type=chunk)[252](index=252&type=chunk) - A detailed list of exhibits is provided, including corporate governance documents, warrant forms, equity incentive plans, and various agreements (e.g., Supply Chain, Employment, Placement Agent, Distribution, Securities Purchase)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) [Form 10-K Summary](index=41&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item reports that there is no Form 10-K Summary - None[259](index=259&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) The report is signed by the Chief Financial Officer, Chief Executive Officer, President, and Directors, dated **March 15, 2024** - The report is signed by the Chief Financial Officer, Chief Executive Officer, President, and Directors, dated **March 15, 2024**[261](index=261&type=chunk)[262](index=262&type=chunk) [Report of Independent Registered Public Accounting Firm](index=42&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, P.C. issued an unqualified opinion on ZIVO's consolidated financial statements for **2023** and **2022**, affirming fair presentation in accordance with GAAP. However, the report includes an explanatory paragraph highlighting substantial doubt about the company's ability to continue as a going concern due to recurring losses. The auditor also identified the accounting treatment for Private Placement Warrants as a critical audit matter, requiring complex judgment and specialized skills [Opinion on the Consolidated Financial Statements](index=42&type=section&id=Opinion%20on%20the%20Consolidated%20Financial%20Statements) - BDO USA, P.C. issued an unqualified opinion, stating that the consolidated financial statements for **2023** and **2022** present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP[263](index=263&type=chunk) [Going Concern Uncertainty](index=42&type=section&id=Going%20Concern%20Uncertainty) - The auditor's report includes an explanatory paragraph regarding substantial doubt about ZIVO's ability to continue as a going concern, citing recurring losses and negative cash flows from operations[264](index=264&type=chunk) [Basis for Opinion](index=42&type=section&id=Basis%20for%20Opinion) - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement and evaluating accounting principles and estimates[266](index=266&type=chunk)[267](index=267&type=chunk) - The auditor was not engaged to perform an audit of internal control over financial reporting and thus expresses no opinion on its effectiveness[266](index=266&type=chunk) [Critical Audit Matter](index=42&type=section&id=Critical%20Audit%20Matter) - The critical audit matter identified was the assessment of the accounting treatment for Private Placement Warrants (issued in **2023**) as equity or liability[269](index=269&type=chunk)[270](index=270&type=chunk) - This assessment required challenging and complex auditor judgment due to the complexity of warrant features, interpretation of agreement terms, and application of accounting guidance, necessitating specialized skills and knowledge[270](index=270&type=chunk) - Audit procedures included inspecting agreements, evaluating management's technical accounting analyses, and utilizing specialized professionals[271](index=271&type=chunk) [ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS](index=43&type=section&id=ZIVO%20BIOSCIENCE,%20INC.%20AND%20SUBSIDIARIES%20CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets show ZIVO's financial position as of **December 31, 2023**, and **2022**. Total assets decreased from **$2.1 million** in **2022** to **$0.56 million** in **2023**, primarily due to a significant drop in cash. Total liabilities increased from **$2.1 million** to **$2.76 million**, driven by higher accounts payable and accrued liabilities. Stockholders' deficit worsened from **$(10,622)** to **$(2.2) million** Consolidated Balance Sheet Highlights (As of December 31) | Metric | 2023 ($) | 2022 ($) | Change (2023 vs 2022) ($) | | :------------------------------------ | :----------- | :----------- | :-------------------- | | **ASSETS:** | | | | | Cash | $274,380 | $1,799,263 | $(1,524,883) | | Total current assets | $425,377 | $1,901,679 | $(1,476,302) | | Total assets | $555,715 | $2,123,019 | $(1,567,304) | | **LIABILITIES:** | | | | | Accounts payable | $993,090 | $490,670 | +$502,420 | | Accrued liabilities – employee bonus | $1,148,770 | $398,176 | +$750,594 | | Total current liabilities | $2,761,558 | $2,027,722 | +$733,836 | | Total liabilities | $2,761,558 | $2,133,641 | +$627,917 | | **STOCKHOLDERS' (DEFICIT):** | | | | | Accumulated deficit | $(123,581,714) | $(115,804,530) | $(7,777,184) | | Total stockholders' (deficit) | $(2,205,843) | $(10,622) | $(2,195,221) | - Total assets decreased by **$1.57 million** from **$2.12 million** in **2022** to **$0.56 million** in **2023**, primarily driven by a **$1.52 million decrease** in cash[274](index=274&type=chunk) - Total liabilities increased by **$0.63 million** from **$2.13 million** in **2022** to **$2.76 million** in **2023**, largely due to increases in accounts payable and accrued employee bonuses[276](index=276&type=chunk) - The accumulated deficit grew by **$7.78 million** to **$123.58 million** in **2023**, resulting in a total stockholders' deficit of **$(2.21) million**[278](index=278&type=chunk) [ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS](index=44&type=section&id=ZIVO%20BIOSCIENCE,%20INC.%20AND%20SUBSIDIARIES%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The consolidated statements of operations show a net loss of **$7.78 million** in **2023**, an improvement from **$8.75 million** in **2022**. The company generated its first product revenue of **$27,650** in **2023**. Gross margin was **$11,610**. Operating loss decreased, but total other expense increased significantly due to amortization of debt discount and higher interest expenses Consolidated Statements of Operations Highlights (Year Ended December 31) | Metric | 2023 ($) | 2022 ($) | Change (2023 vs 2022) ($) | | :------------------------------------ | :----------- | :----------- | :-------------------- | | Product revenue | $27,650 | $0 | +$27,650 | | Total Cost of Goods Sold | $16,040 | $0 | +$16,040 | | Gross Margin | $11,610 | $0 | +$11,610 | | General and administrative | $5,897,594 | $6,491,704 | -$594,110 | | Research and development | $1,377,028 | $2,240,270 | -$863,242 | | Loss from operations | $(7,263,012) | $(8,731,974) | +$1,468,962 | | Total Other Expense | $(514,172) | $(13,319) | -$500,853 | | Net Loss | $(7,777,184) | $(8,745,293) | +$968,109 | | Basic and Diluted Loss Per Share ($) | $(4.60) | $(5.57) | +$0.97 | - Net loss improved by **$0.97 million**, from **$(8.75) million** in **2022** to **$(7.78) million** in **2023**[281](index=281&type=chunk) - Product revenue of **$27,650** was recognized in **2023**, with a corresponding cost of goods sold of **$16,040**, resulting in a gross margin of **$11,610**[281](index=281&type=chunk) - Loss from operations decreased by **$1.47 million**, while total other expense increased significantly due to amortization of debt discount (**$439,594**) and higher interest expenses[281](index=281&type=chunk) [ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD JANUARY 1, 2022 THROUGH DECEMBER 31, 2023](index=45&type=section&id=ZIVO%20BIOSCIENCE,%20INC.%20AND%20SUBSIDIARIES%20CONSOLIDATED%20STATEMENT%20OF%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)%20FOR%20THE%20PERIOD%20JANUARY%201,%202022%20THROUGH%20DECEMBER%2031,%202023) The consolidated statement of stockholders' equity (deficit) shows a significant increase in accumulated deficit from **$(107.06) million** at **January 1, 2022**, to **$(123.58) million** at **December 31, 2023**. Total stockholders' deficit worsened from **$(10,622)** in **2022** to **$(2.21) million** in **2023**, despite capital raises from stock and warrant issuances Consolidated Statement of Stockholders' Equity (Deficit) Highlights | Metric | Jan 1, 2022 ($) | Dec 31, 2022 ($) | Dec 31, 2023 ($) | | :------------------------------------ | :------------ | :------------- | :------------- | | Common Stock (Amount) | $1,570 | $1,570 | $2,383 | | Additional Paid-in Capital | $113,099,876 | $115,792,338 | $121,373,488 | | Accumulated Deficit | $(107,059,237) | $(115,804,530) | $(123,581,714) | | Total Stockholders' (Deficit) | $6,042,209 | $(10,622) | $(2,205,843) | - The accumulated deficit increased by **$7.78 million** in **2023**, reaching **$(123.58) million**, reflecting the net loss for the year[285](index=285&type=chunk) - Total stockholders' deficit worsened from **$(10,622)** at **December 31, 2022**, to **$(2,205,843)** at **December 31, 2023**, despite proceeds from private offerings and stock sales[285](index=285&type=chunk) [ZIVO BIOSCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS](index=45&type=section&id=ZIVO%20BIOSCIENCE,%20INC.%20AND%20SUBSIDIARIES%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash flows from operating activities used **$5.8 million** in **2023**, an improvement from **$7.1 million** used in **2022**. Investing activities were zero in both years. Financing activities generated **$4.3 million** in **2023**, primarily from private placements of registered securities and direct sales of common stock, compared to zero in **2022**. Overall, cash decreased by **$1.5 million** in **2023**, ending the year with **$274,380** Consolidated Statements of Cash Flows Highlights (Year Ended December 31) | Activity | 2023 ($) | 2022 ($) | | :------------------------------------ | :------------- | :------------- | | Net cash used in operating activities | $(5,799,893) | $(7,102,612) | | Net cash used in investing activities | $0 | $0 | | Net cash provided by financing activities | $4,275,010 | $0 | | Net increase (decrease) in cash and cash equivalents | $(1,524,883) | $(7,102,612) | | Cash at end of period | $274,380 | $1,799,263 | - Cash used in operating activities decreased by **$1.3 million** in **2023**, reflecting a lower net loss and favorable changes in working capital[216](index=216&type=chunk)[219](index=219&type=chunk) - Financing activities provided **$4.3 million** in **2023**, primarily from private placements of registered securities (**$3.6 million**) and direct sales of common stock (**$0.64 million**)[218](index=218&type=chunk)[219](index=219&type=chunk) - The company's cash balance decreased by **$1.5 million** in **2023**, ending the year at **$274,380**[219](index=219&type=chunk) [NOTE 1 - DESCRIPTION OF BUSINESS](index=47&type=section&id=NOTE%201%20-%20DESCRIPTION%20OF%20BUSINESS) Zivo Bioscience, Inc. and its subsidiaries aim to generate future income by licensing and selling natural bioactive ingredients derived from proprietary algae cultures to manufacturers in animal, human, dietary supplement, and medical food sectors - ZIVO's business model is to derive income from licensing and selling natural bioactive ingredients from proprietary algae cultures to animal, human, and dietary supplement/medical food manufacturers[295](index=295&type=chunk) [NOTE 2 - BASIS OF PRESENTATION](index=47&type=section&id=NOTE%202%20-%20BASIS%20OF%20PRESENTATION) ZIVO's financial statements are prepared on a going concern basis despite recurring losses and negative cash flows, which raise substantial doubt about its ability to continue operations. The company also effected a **1-for-6 reverse stock split** in **October 2023**, retroactively adjusting all share and per-share information [Going Concern](index=47&type=section&id=Going%20Concern) - ZIVO has incurred net losses and negative operating cash flows since inception, with an accumulated deficit of **$123.6 million**, leading to substantial doubt about its ability to continue as a going concern[296](index=296&type=chunk)[297](index=297&type=chunk)[299](index=299&type=chunk) - The company plans to fund ongoing activities through current cash and additional equity or debt financings, but success is not assured[298](index=298&type=chunk) [Stock Split](index=47&type=section&id=Stock%20Split) - On **October 26, 2023**, ZIVO completed a **1-for-6 reverse stock split** of its common stock, which also proportionately decreased authorized shares and retroactively adjusted all share and per-share information[300](index=300&type=chunk) [NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=47&type=section&id=NOTE%203%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines ZIVO's significant accounting policies, including principles of consolidation, reliance on accounting estimates, cash and cash equivalents management, lease accounting (ROU assets and liabilities), revenue recognition under ASC 606, expensing of R&D costs, deferred income taxes with a full valuation allowance, stock-based compensation using Black-Scholes, income (loss) per share calculations, single-segment reporting, warrant classification, fair value measurements using the FASB hierarchy, and concentrations of credit risk. The company also adopted new accounting standards (ASU 2016-13 and ASU 2020-06) in **2023** with no material impact [Principles of Consolidation](index=47&type=section&id=Principles%20of%20Consolidation) - The consolidated financial statements include Zivo Bioscience, Inc. and its wholly-owned subsidiaries, with intercompany transactions eliminated[300](index=300&type=chunk) [Accounting Estimates](index=47&type=section&id=Accounting%20Estimates) - Financial statements require management to make estimates and assumptions in accordance with GAAP, which may differ from actual results[301](index=301&type=chunk) [Cash](index=47&type=section&id=Cash) - Cash equivalents include highly liquid debt instruments with original maturities of **three months or less**[302](index=302&type=chunk) - Cash balances at financial institutions may exceed FDIC insured limits, but no losses have been experienced[320](index=320&type=chunk) [Leases](index=48&type=section&id=Leases) - ZIVO recognizes ROU assets and lease liabilities for operating leases on the balance sheet, based on the present value of lease payments using its incremental borrowing rate[303](index=303&type=chunk)[305](index=305&type=chunk) - The company has elected the practical expedient not to separate lease and nonlease components for its building leases[305](index=305&type=chunk) [Revenue Recognition](index=48&type=section&id=Revenue%20Recognition) - Revenue is recognized in accordance with ASC 606, using a five-step model, when performance obligations are satisfied and control of the product is transferred, typically at a single point in time[306](index=306&type=chunk) - Management exercises judgment in identifying distinct performance obligations within contracts[307](index=307&type=chunk) [Research and Development](index=48&type=section&id=Research%20and%20Development) - R&D costs are expensed as incurred, including internal (salaries) and external clinical study expenses for biotech and agtech[309](index=309&type=chunk) - R&D costs are offset by the amortization of deferred R&D obligations from Participation Agreements[309](index=309&type=chunk) [Income Taxes](index=48&type=section&id=Income%20Taxes) - Deferred income taxes are determined using the asset and liability method, with a full valuation allowance established due to a history of losses and uncertainty of realizing deferred tax assets[310](index=310&type=chunk)[311](index=311&type=chunk) - Utilization of net operating loss carry-forwards is subject to annual limitations due to "change in ownership" provisions[312](index=312&type=chunk) [Stock Based Compensation](index=49&type=section&id=Stock%20Based%20Compensation) - Stock-based compensation is recognized at grant-date fair value using the Black-Scholes option pricing model, with the simplified term method used for expected term due to lack of historical data[313](index=313&type=chunk)[314](index=314&type=chunk) [Income (Loss) Per Share](index=49&type=section&id=Income%20(Loss)%20Per%20Share) - Basic loss per share is calculated by dividing net loss by weighted average common stock outstanding[315](index=315&type=chunk) - For **2023** and **2022**, potentially dilutive securities (options, warrants, convertible debentures) were anti-dilutive, resulting in basic and diluted loss per share being the same[315](index=315&type=chunk) [Segment Reporting](index=49&type=section&id=Segment%20Reporting) - ZIVO reports all financial results as a single segment, as the CEO reviews consolidated financial information for operating decisions and performance assessment[316](index=316&type=chunk) - The company operates solely in the United States[316](index=316&type=chunk) [Warrants](index=49&type=section&id=Warrants) - Warrants are classified as equity or liability based on specific terms and accounting guidance (ASC 480, ASC 815-40)[317](index=317&type=chunk) - Equity-classified warrants are measured at fair value upon issuance and not remeasured, while liability-classified warrants are remeasured at fair value each period, using Black-Scholes modeling[317](index=317&type=chunk) [Fair Value of Financial Instruments](index=50&type=section&id=Fair%20Value%20of%20Financial%20Instruments) - Fair value measurements adhere to the FASB fair value hierarchy (Level 1, 2, 3 inputs)[318](index=318&type=chunk)[323](index=323&type=chunk) - Fair values of short-term assets and liabilities approximated carrying values. Convertible notes were accounted for at fair value using Level 3 inputs[319](index=319&type=chunk) [Concentrations of Credit Risk](index=50&type=section&id=Concentrations%20of%20Credit%20Risk) - Credit risk is concentrated in cash and cash equivalents, with balances sometimes exceeding FDIC insured limits, but no significant losses have occurred[320](index=320&type=chunk) [Recently Adopted Accounting Standards](index=50&type=section&id=Recently%20Adopted%20Accounting%20Standards) - ZIVO adopted ASU 2016-13 (Measurement of Credit Losses on Financial Instruments) and ASU 2020-06 (Debt with Conversion and Other Options) effective **January 1, 2023**[321](index=321&type=chunk)[322](index=322&type=chunk) - Neither ASU had a material impact on the company's financial statements or diluted earnings per share for **2023**[321](index=321&type=chunk)[322](index=322&type=chunk) [NOTE 5 - LOAN PAYABLE, RELATED PARTIES](index=52&type=section&id=NOTE%205%20-%20LOAN%20PAYABLE,%20RELATED%20PARTIES) ZIVO engaged in related party loan transactions in **2023**, including a **$1 million 10% promissory note** and warrants issued to its CEO, which was fully satisfied by **October 2023**. Additionally, a **$150,000 10% promissory note** was issued to HEP Investments, LLC, a significant shareholder, and fully repaid in **December 2023** [Payne Bridge Loan](index=52&type=section&id=Payne%20Bridge%20Loan) - On **April 3, 2023**, ZIVO issued a **$1 million 10% promissory note** and warrants to its CEO[330](index=330&type=chunk) - The warrants were valued at **$439,594** and recorded as additional paid-in capital and a debt discount[333](index=333&type=chunk) - The Payne Note matured on **October 2, 2023**, with an effective interest rate of **49.0%** (including discount amortization), and was fully satisfied[334](index=334&type=chunk) [HEP Investments, LLC](index=52&type=section&id=HEP%20Investments,%20LLC) - On **November 16, 2023**, ZIVO issued a **$150,000 10% promissory note** to HEP Investments, LLC, which was fully repaid on **December 5, 2023**[335](index=335&type=chunk)[336](index=336&type=chunk) [NOTE 6 - CONVERTIBLE DEBT](index=52&type=section&id=NOTE%206%20-%20CONVERTIBLE%20DEBT) ZIVO has **$240,000** in outstanding convertible debentures with a **1% annual interest rate**. The original maturity dates have passed, but the lender allows rolling **30-day extensions** - ZIVO has **$240,000** in outstanding convertible debentures with a **1% annual interest rate**, with rolling **30-day extensions** past their original maturity dates[339](index=339&type=chunk) [NOTE 7 - NOTE PAYABLE](index=53&type=section&id=NOTE%207%20-%20NOTE%20PAYABLE) ZIVO entered into and fully repaid two unsecured short-term loans for insurance premiums: **$605,600** at **8.4% APR** in **2023** and **$628,600** at **4.15% APR** in **2022** [Short Term Loans](index=53&type=section&id=Short%20Term%20Loans) - In **2023**, ZIVO secured and fully repaid a **$605,600 unsecured short-term loan** at **8.4% APR** for insurance premiums[340](index=340&type=chunk) - A similar **$628,600 loan** from **2022** at **4.15% APR** was also fully repaid by the end of **2022**[341](index=341&type=chunk) [NOTE 8 - DEFERRED R&D OBLIGATIONS - PARTICIPATION AGREEMENTS](index=53&type=section&id=NOTE%208%20-%20DEFERRED%20R%26D%20OBLIGATIONS%20-%20PARTICIPATION%20AGREEMENTS) ZIVO entered into **21 Participation Agreements** for **$2,985,000**, granting warrants and a **44.78% "Revenue Share"** of license fees. The associated R&D obligation, initially **$2,031,103**, was amortized as a contra R&D expense (**$701,332** in **2023**, **$774,025** in **2022**) and is now fully amortized. The agreements include buy-back options for ZIVO under specific conditions - ZIVO entered **21 Participation Agreements** for **$2,985,000**, granting warrants and a **44.78% "Revenue Share"** of license fees to Participants[342](index=342&type=chunk)[345](index=345&type=chunk) - Warrants were valued at **$953,897**, and **$2,031,103** was recorded as Deferred R&D Obligation[343](index=343&type=chunk) - The R&D obligation was amortized as a contra R&D expense (**$701,332** in **2023**, **$774,025** in **2022**) and is now fully amortized as of **December 31, 2023**[343](index=343&type=chunk) - The agreements include options for ZIVO to buy back the Revenue Share under specific terms, including premiums and minimum payment thresholds[344](index=344&type=chunk) [NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT)](index=54&type=section&id=NOTE%209%20-%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note details changes in ZIVO's stockholders' equity (deficit), including a registered direct offering in **June 2023** that raised approximately **$4 million** from stock and warrant sales. The company also completed a **1-for-6 reverse stock split** in **October 2023**. Directors' fees decreased in **2023**, while stock-based compensation expense was **$870,000**. Information on outstanding common stock options and private/public warrants is also provided, showing **292,515 options** and **671,448 private warrants** outstanding as of **December 31, 2023** [June 2023 Registered Direct Offering and 2023 Private Placement Warrants](index=54&type=section&id=June%202023%20Registered%20Direct%20Offering%20and%202023%20Private%20Placement%20Warrants) - On **July 5, 2023**, ZIVO completed a registered direct offering, selling **171,666 shares** of common stock and **78,021 pre-funded warrants** for approximately **$4 million gross proceeds**[347](index=347&type=chunk) - Series A and B Warrants (**249,688 shares each**) were issued as additional consideration, with an exercise price of **$16.80 per share**, subject to adjustment[348](index=348&type=chunk) - All pre-funded and Series A/B warrants were equity-classified, and net proceeds were recorded in additional paid-in capital[349](index=349&type=chunk) [Recapitalization - Reverse Stock Split](index=55&type=section&id=Recapitalization%20-%20Reverse%20Stock%20Split) - On **October 26, 2023**, ZIVO implemented a **1-for-6 reverse stock split**, reducing authorized common stock shares from **150,000,000 to 25,000,000**[350](index=350&type=chunk) - All share and per-share amounts in the financial statements have been retroactively adjusted to reflect this reverse stock split[353](index=353&type=chunk) [Board of Directors Fees](index=55&type=section&id=Board%20of%20Directors%20Fees) - In **June 2023**, the Board awarded **$50,000** in common stock options to each of the three non-employee directors[358](index=358&type=chunk) - Total directors' fees recorded were **$337,682** in **2023**, a decrease from **$1,155,722** in **2022**[359](index=359&type=chunk) - Unpaid directors' fees accrued amounted to **$172,670** as of **December 31, 2023**[359](index=359&type=chunk) [Stock Issuances](index=56&type=section&id=Stock%20Issuances) - In **December 2023**, ZIVO issued **563,016 shares** of common stock for **$640,000** in private placements, with **$485,000** from related parties[361](index=361&type=chunk) [Stock Based Compensation](index=56&type=section&id=Stock%20Based%20Compensation) - Stock-based compensation expense was approximately **$870,000** in **2023** (**$230,000 R&D, $640,000 G&A**), down from **$2.7 million** in **2022**[362](index=362&type=chunk) Stock-Based Compensation Assumptions (Weighted Average) | Assumption | 2023 | 2022 | | :----------------- | :----------- | :----------------- | | Expected volatility | 112.28% | 116.42% to 130.18% | | Expected dividends | 0% | 0% | | Expected term | 5.31 years | 5 to 5.75 years | | Risk free rate | 3.88% | 1.88% to 3.70% | [Stock Warrants Exercised](index=56&type=section&id=Stock%20Warrants%20Exercised) - In **2023**, prefunded warrants from the **June 30, 2023**, Securities Purchase Agreement were exercised for **$47**, leading to the issuance of **78,021 shares** of common stock[366](index=366&type=chunk) [2021 Equity Incentive Plan](index=56&type=section&id=2021%20Equity%20Incentive%20Plan) - The **2021** Equity Incentive Plan, adopted in **October 2021**, initially authorized **166,666 shares**, with an automatic annual increase of **5%** of outstanding shares[367](index=367&type=chunk)[368](index=368&type=chunk) - As of **December 31, 2023**, **232,101 options** have been issued under the **2021** Plan, with **91,559 shares** remaining available for issuance[369](index=369&type=chunk) [2019 Omnibus Long-Term Incentive Plan](index=57&type=section&id=2019%20Omnibus%20Long-Term%20Incentive%20Plan) - No new awards are being made under the **2019** Plan since the adoption of the **2021** Plan[370](index=370&type=chunk) - As of **December 31, 2023**, **60,414 stock options** from the **2019** Plan remained outstanding[370](index=370&type=chunk) [Common Stock Options](index=57&type=section&id=Common%20Stock%20Options) Common Stock Options Summary (As of December 31) | Metric | 2023 (Shares) | 2022 (Shares) | | :------------------------------------ | :----------- | :----------- | | Outstanding, beginning of year | 281,637 | 286,838 | | Issued | 10,878 | 122,671 | | Forfeited | 0 | (127,872) | | Outstanding, end of period | 292,515 | 281,637 | | Weighted Average Exercise Price (Outstandi

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Zivo Bioscience's unaudited condensed consolidated financial statements, highlighting net losses and going concern doubts [Condensed Consolidated Balance Sheet](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEET) | ASSETS (September 30, 2023) | Amount ($) | | :-------------------------- | :--------- | | Cash | 1,484,644 | | Accounts receivable | 2,593 | | Prepaid expenses | 460,632 | | Total current assets | 1,947,869 | | Operating lease - right of use asset | 122,110 | | Security deposit | 32,058 | | TOTAL ASSETS | 2,102,037 | | LIABILITIES AND STOCKHOLDERS' EQUITY (September 30, 2023) | Amount ($) | | :------------------------------------------------------ | :--------- | | Accounts payable | 643,812 | | Current portion of long-term operating lease | 110,398 | | Convertible debentures payable | 240,000 | | Deferred R&D obligations - participation agreements | 57,906 | | Deferred R&D obligations - participation agreements related parties | 19,316 | | Short term loans payable, net of discount | 1,129,696 | | Accrued interest | 149,145 | | Accrued liabilities - payroll and directors fees | 823,779 | | Total Current Liabilities | 3,174,052 | | Long-term operating lease, net of current portion | 22,027 | | TOTAL LIABILITIES | 3,196,079 | | Total stockholders' equity | (1,094,042)| | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 2,102,037 | - The company's total assets decreased slightly from **$2.12 million** at December 31, 2022, to **$2.10 million** at September 30, 2023. Total liabilities increased significantly from **$2.13 million** to **$3.20 million** over the same period, primarily due to an increase in short-term loans payable and accrued liabilities[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :---------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Total revenues | 11,800 | - | 15,850 | - | | Total cost of goods sold| 7,670 | - | 8,371 | - | | Gross margin | 4,130 | - | 7,479 | - | | General and Administrative | 1,355,865 | 1,396,989 | 4,309,343 | 4,373,285 | | Research and Development| 220,653 | 603,105 | 1,064,563 | 1,720,925 | | LOSS FROM OPERATIONS | (1,572,388) | (2,000,094) | (5,366,427) | (6,094,210) | | Total other expense | (252,534) | (4,245) | (502,210) | (10,288) | | NET LOSS | (1,824,922) | (2,004,339) | (5,868,637) | (6,104,498) | | BASIC AND DILUTED LOSS PER SHARE | (1.05) | (1.28) | (3.64) | (3.89) | - The company reported its first commercial revenue of **$11,800** for the three months ended September 30, 2023, and **$15,850** for the nine months ended September 30, 2023, compared to zero revenue in the prior year periods. Net loss decreased to **$1.82 million** for the three months ended September 30, 2023, from **$2.00 million** in the prior year, and to **$5.87 million** for the nine months ended September 30, 2023, from **$6.10 million** in the prior year[15](index=15&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) | Metric | Balance, June 30, 2023 ($) | Private offering issuance of stock and warrants ($) | Employee and director equity-based compensation ($) | Net loss for the three months ended September 30, 2023 ($) | Balance, September 30, 2023 ($) | | :-------------------------------------- | :------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | :--------------------------------------------------------- | :------------------------------ | | Common Stock Amount (a) | 1,570 | 172 | - | - | 1,742 | | Additional Paid in Capital (a) | 116,701,842 | 3,634,791 | 240,749 | - | 120,577,382 | | Accumulated Deficit | (119,848,244) | - | - | (1,824,922) | (121,673,166) | | Total | (3,144,832) | 3,634,963 | 240,749 | (1,824,922) | (1,094,042) | - Stockholders' equity (deficit) improved from **$(3.14 million)** at June 30, 2023, to **$(1.09 million)** at September 30, 2023, primarily due to **$3.63 million** from a private offering issuance of stock and warrants, partially offset by a net loss of **$1.82 million**[18](index=18&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :-------------------------- | :--------------------------------- | :--------------------------------- | | Operating activities | (5,084,160) | (5,655,590) | | Investing activities | - | - | | Financing activities | 4,769,540 | 139,689 | | Net decrease in Cash | (314,620) | (5,515,901) | | Cash at Beginning of Period | 1,799,264 | 8,901,875 | | Cash at End of Period | 1,484,644 | 3,385,974 | - Net cash used in operating activities decreased by approximately **$600,000**, from **$5.7 million** in 2022 to **$5.1 million** in 2023. Cash flows from financing activities significantly increased to **$4.77 million** in 2023, up from **$139,689** in 2022, driven by proceeds from a related party term loan and a registered direct offering[24](index=24&type=chunk)[25](index=25&type=chunk)[111](index=111&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [NOTE 1 - BASIS OF PRESENTATION](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION) - The financial statements are prepared under US GAAP, and Zivo Bioscience has incurred net losses and negative cash flows since inception, with an accumulated deficit of **$121.67 million**, raising substantial doubt about its ability to continue as a going concern[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) - On October 26, 2023, the company effected a **1-for-6 reverse stock split** of its common stock, retroactively adjusting all share, per share, options, and warrants information[31](index=31&type=chunk)[72](index=72&type=chunk) [NOTE 2 - NEW ACCOUNTING STANDARDS](index=6&type=section&id=NOTE%202%20-%20NEW%20ACCOUNTING%20STANDARDS) - The company adopted **ASU 2020-06** effective January 1, 2023, which had no impact on recorded amounts or diluted earnings per share in the condensed consolidated financial statements[33](index=33&type=chunk) [NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%203%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Stock-based compensation is estimated using the Black-Scholes model; expense for the three months ended September 30, 2023, was **$240,750**, down from **$518,161** in the prior year, and for the nine months, it was **$710,661**, down from **$1.59 million**[34](index=34&type=chunk)[35](index=35&type=chunk) - Warrants are classified as equity or liability based on ASC 480/815-40 guidance, with fair value estimated using Black-Scholes; all company warrants are equity-classified and not remeasured[38](index=38&type=chunk) - Fair value measurements are categorized into Level 1, 2, or 3 inputs, with short-term financial instruments approximating their fair values due to their nature[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) [NOTE 4 - LEASES](index=8&type=section&id=NOTE%204%20-%20LEASES) - The company holds two operating lease agreements, with operating lease right-of-use assets decreasing from **$189,282** at December 31, 2022, to **$122,110** at September 30, 2023[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) | Lease Metric | Nine Months Ended Sep 30, 2023 ($) | Year Ended Dec 31, 2022 ($) | | :------------------------------------------ | :--------------------------------- | :-------------------------- | | Operating lease right-of-use asset | 122,110 | 189,282 | | Current portion of long-term operating lease| 110,398 | 99,259 | | Long-term operating lease, net of current portion | 22,027 | 105,918 | | Total lease liabilities | 132,425 | 205,177 | | Lease Expense (Operating) | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :------------------------------------------ | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Operating lease expense | 27,236 | 27,479 | 81,707 | 74,770 | [NOTE 5 - DEBT](index=10&type=section&id=NOTE%205%20-%20DEBT) - The company secured a **$605,600** short-term unsecured loan on February 14, 2023, at an **8.4% APR**, with a principal balance of **$134,578** as of September 30, 2023[48](index=48&type=chunk) - On April 3, 2023, a **$1 million, 10% promissory note** and warrant were issued to the CEO; the warrant was valued at **$433,594**, and the note, fully satisfied on October 2, 2023, had an effective interest rate of **54.0%**[49](index=49&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) [NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT)](index=11&type=section&id=NOTE%206%20-%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) - On July 5, 2023, a registered direct offering and private placement generated approximately **$4 million** in gross proceeds (**$3.6 million net**) from common stock and warrant sales[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - As of September 30, 2023, **292,516 stock options** were outstanding (weighted average exercise price of **$35.56**), with **230,001 exercisable**; additionally, **804,020 private warrants** (weighted average exercise price of **$21.29**) and **495,917 public warrants** (exercise price of **$33.00**) were outstanding[59](index=59&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) [NOTE 7 - COMMITMENTS AND CONTINGENCIES](index=13&type=section&id=NOTE%207%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - The company has compensation agreements with its President/CEO and CFO, and management believes no material legal matters will adversely affect financial condition or operations[67](index=67&type=chunk)[68](index=68&type=chunk) [NOTE 8 - INCOME TAX](index=13&type=section&id=NOTE%208%20-%20INCOME%20TAX) - Subject to US federal and state income taxes, the company expects to report **$0 income tax expense** for 2023 due to a full valuation allowance against its net deferred tax asset[69](index=69&type=chunk)[70](index=70&type=chunk) [NOTE 9 - SUBSEQUENT EVENTS](index=14&type=section&id=NOTE%209%20-%20SUBSEQUENT%20EVENTS) - On October 26, 2023, the company completed a **1-for-6 reverse stock split**, decreasing authorized shares from **150 million** to **25 million**, with all related financial figures retroactively adjusted[71](index=71&type=chunk)[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Zivo's financial condition and results for Q3 and YTD 2023, detailing its biotech and agtech R&D focus and capital resources - ZIVO is a research and development company in biotech and agtech, utilizing proprietary algal and bacterial strains for human and animal health applications[75](index=75&type=chunk) - The company develops algal-derived bioactive compounds for diseases such as poultry coccidiosis, bovine mastitis, human cholesterol, and canine osteoarthritis, seeking strategic development partners[76](index=76&type=chunk)[77](index=77&type=chunk) - ZIVO's Peruvian algal biomass is marketed as a functional food ingredient and nutritional enhancement for human and animal use, and for skin care products, with initial North American sales[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) [Special Note Regarding Forward-Looking Statements](index=14&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements involving known and unknown risks and uncertainties, cautioning readers that actual results may differ materially[73](index=73&type=chunk)[74](index=74&type=chunk) [Overview](index=14&type=section&id=Overview) - ZIVO is a biotech and agtech R&D company with an intellectual property portfolio of proprietary algal and bacterial strains, bioactive molecules, and production techniques for human and animal health[75](index=75&type=chunk) - In biotech, ZIVO develops algal-derived bioactive compounds for diseases like poultry coccidiosis, bovine mastitis, human cholesterol, and canine osteoarthritis, seeking strategic partnerships for commercialization[76](index=76&type=chunk)[77](index=77&type=chunk) - In agtech, ZIVO's Peruvian algal biomass (Zivolife™) is marketed as a functional food ingredient and nutritional enhancement for human and animal use and skin care, with commercial production scaling efforts underway[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) [Results of Operations for the three months ended September 30, 2023 and 2022](index=15&type=section&id=Results%20of%20Operations%20for%20the%20three%20months%20ended%20September%2030,%202023%20and%202022) | Metric | Quarter ended Sep 30, 2023 ($) | Quarter ended Sep 30, 2022 ($) | Change ($) | Change (%) | | :---------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total revenue | 11,800 | - | 11,800 | N/A | | Total cost of goods sold| 7,670 | - | 7,670 | N/A | | Gross margin | 4,130 | - | 4,130 | N/A | | Research and development| 220,653 | 603,105 | (382,452) | -63.4% | | General and administrative | 1,355,865 | 1,396,989 | (41,124) | -2.9% | | Loss for operations | (1,572,388) | (2,000,094) | 427,706 | -21.4% | | Net loss | (1,824,922) | (2,004,339) | 179,417 | -8.9% | - The company generated its first commercial revenue of **$11,800** in Q3 2023; research and development expenses decreased by **63.4%** to **$220,653**, primarily due to lower amortization and reduced third-party research[87](index=87&type=chunk)[90](index=90&type=chunk) - General and administrative expenses decreased slightly by **$40,000 (2.9%)** to **$1.36 million**, driven by reductions in labor and professional fees, partially offset by increased accounting, legal, and listing fees[89](index=89&type=chunk) [Results of Operations for the nine months ended September 30, 2023 and 2022](index=16&type=section&id=Results%20of%20Operations%20for%20the%20nine%20months%20ended%20September%2030,%202023%20and%202022) | Metric | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | Change ($) | Change (%) | | :---------------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Total revenue | 15,850 | - | 15,850 | N/A | | Total costs of goods sold| 8,371 | - | 8,371 | N/A | | Gross margin | 7,479 | - | 7,479 | N/A | | Research and development| 1,064,563 | 1,720,925 | (656,362) | -38.1% | | General and administrative | 4,309,343 | 4,373,285 | (63,942) | -1.5% | | Operating loss | (5,366,427) | (6,094,210) | 727,783 | -11.9% | | Net loss | (5,868,637) | (6,104,498) | 235,861 | -3.9% | - For the nine months, total revenue was **$15,850**, marking the company's first commercial sales; research and development expenses decreased by **38.1%** to **$1.1 million**, primarily due to a **$500,000** reduction in third-party research and lower non-cash compensation[94](index=94&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - General and administrative expenses decreased by **$60,000 (1.5%)** to **$4.31 million**, driven by a **$200,000** reduction in professional fees, partially offset by increases in labor-related costs and other overhead[96](index=96&type=chunk) [Capital Resources](index=18&type=section&id=Capital%20Resources) - As of September 30, 2023, ZIVO's cash balance was **$1.48 million**; the company anticipates significant expenses and operating losses, necessitating additional funding through equity, debt, or collaborations[102](index=102&type=chunk)[106](index=106&type=chunk) - In June 2023, a registered direct offering and private placement generated approximately **$4 million** in gross proceeds (**$3.6 million net**) from common stock and warrant sales[103](index=103&type=chunk) - The company has Participation Agreements with investors, providing a **44.775% 'Revenue Share'** of license fees from bioactive ingredients, with company buy-back options under specific terms[104](index=104&type=chunk)[105](index=105&type=chunk) - Cash used in operating activities for the nine months ended September 30, 2023, was approximately **$5.1 million**, while financing activities generated **$4.7 million**, including **$1.0 million** from a related party term loan and **$3.6 million** from the June 2023 offering[109](index=109&type=chunk)[111](index=111&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - The company's financial statements rely on estimates and judgments, especially for fair value measurements of assets and liabilities, categorized into a three-level hierarchy based on input observability[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Warrants are classified as equity or liability per ASC 480 and ASC 815-40, with fair value estimated using Black-Scholes modeling; all current warrants are equity-classified and not remeasured[118](index=118&type=chunk) - Share-based compensation is recognized at grant-date fair value per **ASC 718**, with forfeitures recorded upon occurrence[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Zivo Bioscience is exempt from market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management found disclosure controls ineffective due to material weaknesses in internal control over financial reporting, with remediation underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in internal control over financial reporting[122](index=122&type=chunk) - Material weaknesses include deficiencies in entity-level controls, IT general controls (user access, vendor management, segregation of duties), and a lack of formal accounting policies and controls over financial reporting and specific GAAP applications[123](index=123&type=chunk)[127](index=127&type=chunk) - Despite material weaknesses, management concluded that consolidated financial statements fairly present the company's financial position, results of operations, and cash flows in accordance with U.S. GAAP after additional analyses[128](index=128&type=chunk) - Remediation efforts include developing training, implementing risk assessment, enhancing internal controls documentation, improving management review, engaging outside accounting resources, and segregating key functions[129](index=129&type=chunk)[133](index=133&type=chunk) [PART II - OTHER INFORMATION](index=22&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings or aware of significant pending litigation - The company is not currently involved in any material legal proceedings or aware of pending litigation that would significantly impact its financial condition or operations[131](index=131&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the prior Annual Report on Form 10-K - No material changes have occurred in the risk factors since the Annual Report on Form 10-K for the year ended December 31, 2022[132](index=132&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported - There were no unregistered sales of equity securities or use of proceeds to report[134](index=134&type=chunk) [Item 3. Defaults upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable for the current reporting period - This section is not applicable[135](index=135&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the current reporting period - This section is not applicable[136](index=136&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[137](index=137&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, and certifications - Exhibits include corporate documents, Note and Warrant agreements, Securities Purchase Agreements, and certifications from Principal Executive and Financial Officers[138](index=138&type=chunk)[139](index=139&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Zivo Bioscience, Inc.'s unaudited financial statements reflect decreased cash, increased liabilities, and ongoing net losses, indicating substantial doubt about its going concern ability - The company has incurred net losses since inception, experienced negative cash flows from operations, and has an accumulated deficit of **$119,848,244**, raising substantial doubt about its ability to continue as a going concern within one year[22](index=22&type=chunk)[24](index=24&type=chunk) [Condensed Consolidated Balance Sheet](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) The condensed consolidated balance sheet details assets, liabilities, and equity changes between June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheet Highlights (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($) | December 31, 2022 ($) | Change ($) | Percentage Change (%) | | :-------------------------------- | :------------ | :---------------- | :----- | :------------------ | | Cash | $21,067 | $1,799,263 | $(1,778,196) | -98.83% | | Total current assets | $530,075 | $1,901,679 | $(1,371,604) | -72.13% | | Total assets | $710,330 | $2,123,019 | $(1,412,689) | -66.54% | | Total Current Liabilities | $3,804,242 | $2,027,722 | $1,776,520 | 87.61% | | Total Liabilities | $3,855,162 | $2,133,641 | $1,721,521 | 80.68% | | Total stockholders' equity (deficit) | $(3,144,832) | $(10,622) | $(3,134,210) | 29506.78% | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail revenues, expenses, and net loss for the three and six months ended June 30, 2023, and 2022 Condensed Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | June 30, 2023 ($) | June 30, 2022 ($) | Change ($) | Percentage Change (%) | | :-------------------------- | :------------ | :------------ | :----- | :------------------ | | Product revenue | $4,050 | $0 | $4,050 | N/A | | Total revenues | $4,050 | $0 | $4,050 | N/A | | Gross margin | $3,349 | $0 | $3,349 | N/A | | General and Administrative | $1,385,102 | $1,629,553 | $(244,451) | -15.00% | | Research and Development | $442,113 | $438,048 | $4,065 | 0.93% | | Total costs and expenses | $1,827,215 | $2,067,601 | $(240,386) | -11.63% | | Net loss | $(2,070,572) | $(2,071,839) | $1,267 | -0.06% | | Basic and Diluted Loss Per Share | $(0.22) | $(0.22) | $0 | 0.00% | Condensed Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | June 30, 2023 ($) | June 30, 2022 ($) | Change ($) | Percentage Change (%) | | :-------------------------- | :------------ | :------------ | :----- | :------------------ | | Product revenue | $4,050 | $0 | $4,050 | N/A | | Total revenues | $4,050 | $0 | $4,050 | N/A | | Gross margin | $3,349 | $0 | $3,349 | N/A | | General and Administrative | $2,953,478 | $2,976,295 | $(22,817) | -0.77% | | Research and Development | $843,910 | $1,117,821 | $(273,911) | -24.50% | | Total costs and expenses | $3,797,388 | $4,094,116 | $(296,728) | -7.25% | | Net loss | $(4,043,714) | $(4,100,159) | $56,445 | -1.38% | | Basic and Diluted Loss Per Share | $(0.43) | $(0.44) | $0.01 | -2.27% | [Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit)](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) The condensed consolidated statement of changes in stockholders' equity (deficit) outlines changes for the six months ended June 30, 2023 Stockholders' Equity (Deficit) Changes (Six Months Ended June 30, 2023) | Metric | December 31, 2022 ($) | June 30, 2023 ($) | | :------------------------------------ | :---------------- | :------------ | | Common Stock Amount | $9,420 | $9,420 | | Additional Paid in Capital | $115,784,488 | $116,693,992 | | Accumulated Deficit | $(115,804,530) | $(119,848,244) | | Total Stockholders' Equity (Deficit) | $(10,622) | $(3,144,832) | - Employee and director equity-based compensation for the six months ended June 30, 2023, totaled **$469,911**, and warrants issued with a related party note contributed **$439,593** to additional paid-in capital[17](index=17&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) The condensed consolidated statement of cash flows details operating, investing, and financing activities for the six months ended June 30, 2023, and 2022 Condensed Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | June 30, 2023 ($) | June 30, 2022 ($) | Change ($) | | :-------------------------------- | :------------ | :------------ | :----- | | Net cash (used in) operating activities | $(3,114,640) | $(4,167,377) | $1,052,737 | | Net cash from by investing activities | $0 | $0 | $0 | | Net cash provided by financing activities | $1,336,444 | $349,222 | $987,222 | | Increase/(Decrease) in Cash | $(1,778,196) | $(3,818,155) | $2,039,959 | | Cash at End of Period | $21,067 | $5,083,720 | $(5,062,653) | - Financing activities in H1 2023 were significantly boosted by **$1,000,000** in proceeds from a related party note payable, contributing to a **$987,222** increase in cash provided by financing activities compared to the prior year[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, covering accounting policies, leases, debt, equity, and subsequent events [NOTE 1 - BASIS OF PRESENTATION](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION) This note explains the basis of financial statement presentation, addressing the company's going concern status despite its accumulated deficit and negative operating cash flows - The financial statements are prepared on a going concern basis, despite the company's accumulated deficit of **$119,848,244** and negative operating cash flows, indicating substantial doubt about its ability to continue operations without additional funding[22](index=22&type=chunk)[24](index=24&type=chunk) [NOTE 2 - NEW ACCOUNTING STANDARDS](index=6&type=section&id=NOTE%202%20-%20NEW%20ACCOUNTING%20STANDARDS) This note details the adoption of new accounting standards, specifically ASU 2020-06, and its impact on the financial statements - The company adopted ASU 2020-06 effective January 1, 2023, which simplifies accounting for convertible instruments, but its adoption had no impact on the condensed consolidated financial statements or diluted earnings per share for the reported periods[25](index=25&type=chunk) [NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=6&type=section&id=NOTE%203%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note summarizes the company's significant accounting policies, including those for stock-based compensation and warrants - Stock-based compensation expense for the three months ended June 30, 2023, was **$227,808**, and for the six months ended June 30, 2023, was **$469,911**, with **65,268** options granted to directors in the three-month period[28](index=28&type=chunk) Black-Scholes Option-Pricing Model Assumptions (Six Months Ended June 30) | Assumption | 2023 | 2022 | | :------------------ | :----- | :----- | | Expected volatility | 112.28% | 130.18% | | Expected dividends | 0 | 0 | | Expected term | 5.3 years | 5.8 years | | Risk free rate | 3.88% | 1.88% | - Warrants are accounted for in accordance with FASB ASC 815, with fair value determined at issuance using the Black-Scholes model and recognized as a component of stockholders' equity, not subject to remeasurement[30](index=30&type=chunk)[31](index=31&type=chunk) [NOTE 4 - LEASES](index=7&type=section&id=NOTE%204%20-%20LEASES) This note details the company's operating lease agreements, including locations, terms, and associated financial balances and expenses - The company has two operating lease agreements: a facility in Ft. Myers, Florida, extended through December 31, 2024, and an office in Bloomfield Hills, Michigan, ending November 30, 2024, which serves as its headquarters[36](index=36&type=chunk)[37](index=37&type=chunk) Operating Lease Balances (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($) | December 31, 2022 ($) | | :---------------------------------- | :------------ | :---------------- | | Operating lease right-of-use asset | $145,241 | $189,282 | | Current portion of long-term operating lease | $106,687 | $99,259 | | Long-term operating lease, net of current portion | $50,920 | $105,918 | | Total Lease Liabilities | $157,607 | $205,177 | - Operating lease expense for the three months ended June 30, 2023, was **$27,236**, and for the six months ended June 30, 2023, was **$54,471**[38](index=38&type=chunk) [NOTE 5 - DEBT](index=9&type=section&id=NOTE%205%20-%20DEBT) This note provides details on the company's debt instruments, including short-term loans and a promissory note issued to its CEO - A short-term, unsecured loan of **$605,600** was entered into on February 14, 2023, with an **8.4%** annual rate, and a principal balance of **$336,444** as of June 30, 2023[41](index=41&type=chunk) - On April 3, 2023, the company issued a **$1 million**, **10%** promissory note and a warrant to purchase **390,000** shares to its CEO, with the note maturing on October 2, 2023. The effective interest rate on the note, including debt discount amortization, was **48.96%** as of June 30, 2023[42](index=42&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk) Payne Bridge Loan Balance Sheet Information (June 30, 2023) | Metric | Amount ($) | | :-------------------------- | :------- | | Short Term Loan | $1,000,000 | | Less: Unamortized debt discount | $(224,680) | | Carrying value of Term Loan | $775,320 | [NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT)](index=10&type=section&id=NOTE%206%20-%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note details changes in stockholders' equity, including information on stock options, warrants, and their exercise prices - As of June 30, 2023, **1,392,675** options have been issued under the 2021 Equity Incentive Plan, with **549,291** shares remaining available for issuance. The 2019 Omnibus Long-Term Incentive Plan is no longer issuing new awards[49](index=49&type=chunk)[50](index=50&type=chunk) Common Stock Options Summary (June 30, 2023 vs. June 30, 2022) | Metric | June 30, 2023 | June 30, 2022 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 1,689,907 | 1,721,074 | | Issued | 65,268 | 172,500 | | Outstanding, end of period | 1,755,175 | 1,131,949 | | Weighted Average Exercise Price (end of period) | $5.93 | $7.48 | Unregistered Warrants Summary (June 30, 2023 vs. June 30, 2022) | Metric | June 30, 2023 | June 30, 2022 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 1,602,198 | 2,553,635 | | Issued | 390,000 | - | | Expired | (598,518) | (28,591) | | Outstanding, end of period | 1,393,680 | 2,525,044 | | Weighted Average Exercise Price (end of period) | $6.53 | $7.57 | - As of June 30, 2023, there is no intrinsic value in any outstanding options as the market price of common stock is lower than all exercise prices[51](index=51&type=chunk) [NOTE 7 - COMMITMENTS AND CONTINGENCIES](index=12&type=section&id=NOTE%207%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the company's commitments and contingencies, including the settlement of an arbitration matter - The company settled an arbitration matter with AEGLE Partners, 2 LLC on April 20, 2023, for an immaterial amount, related to a Supply Chain Consulting Agreement[57](index=57&type=chunk) [NOTE 8 - INCOME TAX](index=12&type=section&id=NOTE%208%20-%20INCOME%20TAX) This note discusses the company's income tax position, including the valuation allowance against its net deferred tax asset - The company has recorded a full valuation allowance against its net deferred tax asset, as it does not expect to realize it, resulting in an expected income tax expense of **$0** for 2023[59](index=59&type=chunk)[60](index=60&type=chunk) [NOTE 9 – SUBSEQUENT EVENTS](index=12&type=section&id=NOTE%209%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the reporting period, specifically a registered direct offering and private placement - On June 30, 2023, the company completed a registered direct offering and concurrent private placement, closing on July 5, 2023, which generated approximately **$4,000,000** in gross proceeds (net proceeds of **$3,634,963**). This included the sale of **1,030,000** common shares, pre-funded warrants for **468,130** shares, and Series A and B Common Warrants for **1,498,130** shares each[62](index=62&type=chunk)[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operational results, highlighting initial commercial revenue, R&D, and capital raising efforts, addressing ongoing losses and funding needs - The company is a research and development entity focused on biotech and agtech, leveraging proprietary algal and bacterial strains for applications in human and animal health, including product candidates for poultry coccidiosis and functional food ingredients[65](index=65&type=chunk)[66](index=66&type=chunk)[69](index=69&type=chunk) - ZIVO recorded its first commercial revenue of **$4,050** from sales of dried algal biomass product as a human food or food ingredient during the three and six months ended June 30, 2023, compared to **$0** in the prior year periods[76](index=76&type=chunk)[84](index=84&type=chunk) - The company continues to face substantial doubt about its ability to continue as a going concern, requiring additional funding through equity or debt financings to support operations and product development, with an estimated **$2.0 million** needed for basic operations over the next 12 months, excluding R&D[95](index=95&type=chunk)[96](index=96&type=chunk)[101](index=101&type=chunk) [Special Note Regarding Forward-Looking Statements](index=13&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This note cautions readers about forward-looking statements, which involve inherent risks and uncertainties regarding future funding, profitability, and product regulation - The report contains forward-looking statements regarding funding, profitability, product regulation, market acceptance, testing results, licensing fees, and financial condition, which involve known and unknown risks and uncertainties[63](index=63&type=chunk)[68](index=68&type=chunk) [Overview](index=13&type=section&id=Overview) This overview describes ZIVO's biotech and agtech operations, focusing on developing bioactive compounds from algal culture and producing algal biomass - ZIVO operates in biotech and agtech, developing bioactive compounds from proprietary algal culture for human and animal diseases (e.g., poultry coccidiosis, bovine mastitis, human cholesterol, canine osteoarthritis) and producing algal biomass as a functional food ingredient and for skin care[65](index=65&type=chunk)[66](index=66&type=chunk)[69](index=69&type=chunk)[74](index=74&type=chunk) - The company is focusing on a product candidate for coccidiosis in broiler chickens due to its potential for rapid revenue generation and the global market need for non-antibiotic solutions[67](index=67&type=chunk) - ZIVO's algal biomass is produced in Peru, with efforts underway to scale up to commercial-scale ponds for its branded product, Zivolife™, targeting the North American green powder food market[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [Results of Operations for the Three Months Ended June 30, 2023 and 2022](index=15&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202023%20and%202022) This section analyzes operational results for the three months ended June 30, 2023, and 2022, focusing on revenue, expenses, and net loss Key Financials (Three Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Total revenue | $4,050 | $0 | $4,050 | N/A | | Cost of goods sold | $701 | $0 | $701 | N/A | | Gross margin | $3,349 | $0 | $3,349 | N/A | | General and Administrative | $1,385,102 | $1,629,553 | $(244,451) | -15.00% | | Research and Development | $442,113 | $438,048 | $4,065 | 0.93% | | Net loss | $(2,070,572) | $(2,071,839) | $1,267 | -0.06% | - The decrease in General and Administrative expenses by approximately **$250,000** was primarily due to a **$100,000** reduction in labor-related expenses (lower non-cash compensation) and **$180,000** lower professional services (including **$140,000** less in directors' fees), partially offset by a **$30,000** increase in other overhead[78](index=78&type=chunk) - Research and Development expenses remained relatively flat, with a slight increase of **$4,065**. Gross R&D spending increased by **$40,000**, driven by a **$60,000** increase in third-party research studies, offset by a **$20,000** decrease in internal labor costs (lower non-cash compensation)[79](index=79&type=chunk)[80](index=80&type=chunk) [Results of Operations for the Six Months Ended June 30, 2023 and 2022](index=16&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) This section analyzes operational results for the six months ended June 30, 2023, and 2022, focusing on revenue, expenses, and net loss Key Financials (Six Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Total revenue | $4,050 | $0 | $4,050 | N/A | | Cost of goods sold | $701 | $0 | $701 | N/A | | Gross margin | $3,349 | $0 | $3,349 | N/A | | General and Administrative | $2,953,478 | $2,976,295 | $(22,817) | -0.77% | | Research and Development | $843,910 | $1,117,821 | $(273,911) | -24.50% | | Net loss | $(4,043,714) | $(4,100,159) | $56,445 | -1.38% | - General and Administrative expenses remained stable year-over-year. A **$200,000** reduction in professional fees (including **$400,000** lower directors' fees and **$100,000** less in consultant spending) was largely offset by a **$100,000** increase in labor-related costs (higher salary, lower non-cash compensation) and **$70,000** in other overhead (insurance, filing fees)[86](index=86&type=chunk) - Research and Development expenses decreased by approximately **$270,000**, primarily due to a **$180,000** decrease in internal labor costs (lower non-cash compensation) and a **$50,000** decrease in third-party R&D spending[88](index=88&type=chunk)[89](index=89&type=chunk) [Capital Resources](index=17&type=section&id=Capital%20Resources) This section details the company's capital resources, cash position, and critical need for additional funding through equity, debt, or collaborations - As of June 30, 2023, ZIVO's cash balance was **$21,067**. The company anticipates significant ongoing expenses and operating losses, necessitating additional funding through equity or debt financings, or collaborations[91](index=91&type=chunk)[95](index=95&type=chunk) - A June 30, 2023, registered direct offering and private placement, which closed on July 5, 2023, generated approximately **$3.7 million** in net proceeds, but the company still estimates a need for approximately **$2.0 million** in cash over the next 12 months for basic operations, excluding R&D[92](index=92&type=chunk)[101](index=101&type=chunk) - The company has Participation Agreements with investors, providing a **44.775%** 'Revenue Share' of license fees from bioactive ingredients, with buy-back options for the company under specific terms[93](index=93&type=chunk)[94](index=94&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=18&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section outlines the company's critical accounting policies and the significant judgments and estimates involved in preparing its financial statements - The company's financial statements rely on estimates and judgments, particularly for fair value measurements (classified into Level 1, 2, or 3 hierarchy), complex financial instruments (evaluating embedded derivatives), and stock-based compensation[102](index=102&type=chunk)[104](index=104&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Fair values of cash, prepaid expenses, accounts payable, and accrued expenses approximate their carrying values due to their short-term nature. Convertible notes were accounted for on a fair value basis using Level 3 inputs[107](index=107&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Zivo Bioscience, Inc. is not required to provide quantitative and qualitative disclosures about market risk - This item is not applicable for smaller reporting companies[111](index=111&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of June 30, 2023, due to material weaknesses in internal control over financial reporting, with remediation underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses identified as of December 31, 2022, which continue to exist[113](index=113&type=chunk) - Material weaknesses include inadequate entity-level controls (control environment, risk assessment, monitoring), ineffective information technology general controls (user access, vendor management, segregation of duties), and insufficient formal accounting policies and controls over financial reporting, monthly close, and completeness/accuracy of information[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Specific control deficiencies were noted in accounting for income taxes, stock-based compensation, and deferred research and development obligations[116](index=116&type=chunk) - Remediation efforts include developing training, implementing a risk assessment process, enhancing documentation of accounting policies and procedures, engaging outside resources for complex accounting, and improving monitoring activities and segregation of duties[118](index=118&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=19&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures, concluding their ineffectiveness due to identified material weaknesses - The CEO and CFO determined that disclosure controls and procedures were not effective as of June 30, 2023, due to persistent material weaknesses[113](index=113&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=20&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section identifies specific material weaknesses in internal control over financial reporting, including entity-level controls, IT general controls, and accounting policies - Identified material weaknesses include deficiencies in entity-level controls (control environment, risk assessment, monitoring), information technology general controls (user access, vendor management, segregation of duties), and lack of formal accounting policies and controls across business processes[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Specific accounting control weaknesses were found in income taxes, stock-based compensation, and deferred research and development obligations[116](index=116&type=chunk) [Remediation Plan](index=21&type=section&id=Remediation%20Plan) This section outlines the company's remediation plan to address identified material weaknesses in internal control over financial reporting - The company is implementing measures such as COSO framework training, a risk assessment process, comprehensive accounting policies, enhanced documentation for management review controls, engaging external resources for complex accounting, and improving monitoring activities and segregation of duties[118](index=118&type=chunk) [Changes in Internal Control Over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on changes in internal control over financial reporting during the quarter, noting no material changes beyond remediation efforts - No other material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, apart from the described remediation measures[118](index=118&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any other material legal proceedings or aware of any pending or threatened legal actions - The company is not currently involved in any other material legal proceedings and is unaware of any pending or threatened legal actions[119](index=119&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022[120](index=120&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's unregistered sales of equity securities and the use of proceeds, including the June 2023 Registered Direct Offering - On June 30, 2023, the company sold **1,030,000** shares of common stock and pre-funded warrants for **468,130** shares, along with Series A and B Common Warrants for **1,498,130** shares each, to a single institutional investor. Gross proceeds were approximately **$4,000,000**[62](index=62&type=chunk)[73](index=73&type=chunk) [Item 3. Defaults upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable to the company - This item is not applicable[123](index=123&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[124](index=124&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is reported[125](index=125&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, debt instruments, and various agreements - The exhibits include organizational documents (Articles of Incorporation, By-laws), debt instruments (Note, Warrants), and various agreements (Subscription Agreement, Securities Purchase Agreement), along with required certifications[126](index=126&type=chunk) [SIGNATURES](index=23&type=section&id=SIGNATURES) The report is signed by the Chief Executive Officer and Chief Financial Officer on August 14, 2023, certifying its submission - The report was signed by John B. Payne, CEO, and Keith R. Marchiando, CFO, on August 14, 2023[131](index=131&type=chunk)